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QUESTIONS   OF    THE   DAY. 

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54— Relation  of  the  Tariff  to  Wages.  By  DAVID  A,  WELLS.  Octavo, 
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58— Politics  as  a  Duty  and  as  a  Career.  By  MOORFIELD  STOREY. 
Octavo,  paper  .  .  .  .  .  .  .  .  .25 

59 — Monopolies  and  the  People.  By  CHAS.  W.  BAKER.  Octavo, 
cloth.  Third  edition,  revised  and  enlarged  .  .  .  .  i  50 

60. — The  Public  Regulation  of  Railways.  l>y  W.  D.  DABNEY. 
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62 — American  Farms :  Their  Condition  and  Future.  By  J.  R.  ELLIOTT. 
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64 — The  Question  of  Ships.  By  WELLS  and  CODMAN  Paper  .  25 
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and  Shipping  Subsidies  and  Bounties.  By  JOHN  CODMAN. 

65 — A  Tariff  Primer.  The  Effects  of  Protection  upon  the  Farmer  and 
Laborer.  By  Hon.  PORTER  SHERMAN.  Paper  ...  25 

66 — The  Death  Penalty.  A  Consideration  of  the  Objections  to  Capital 
Punishment.  By  ANDREW  J.  PALM.  New  edition  in  preparation 

67 — The  Question  of  Copyright.     Edited  by  G.  H.  PUTNAM       .     i  75 

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70 — The  Question  of  Silver.  Revised  edition.  By  Louis  R.  EHRICH. 
Paper,  40  cents  ;  cloth  ........  75 

71— Who  Pays  Your  Taxes?  By  DAVID  A.  WELLS,  THOMAS  G. 
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72 — The  Farmer's  Tariff  Manual.     By  D.  STRANGE   .        .        .125 

73 — The  Economy  of  High  Wages.  By  J.  SCHOENHOF,  author  of 
"  The  Industrial  Situation,"  etc.  Octavo,  cloth  .  .  .  i  50 

74— The  Silver  Situation  in  the  United  States.  By  Prof.  F.  W. 
TAUSSIG.  Revised  edition.  Octavo  "75 


MONOPOLIES 


AND 


THE  PEOPLE 


BY 
CHARLES  WHITING  BAKER,  C.E. 

EDITOR  OF  "ENGINEERING  NEWS" 


THIRD  EDITION,  REVISED  AND  ENLARGED 


NEW  YORK  &  LONDON 
G.  P.  PUTNAM'S  SONS 
Cbe  Unicfterbocher  press 


COPYRIGHT,  1889 

BY 
G.  P.  PUTNAM'S  SONS 


Revised  Edition 
COPYRIGHT,  1899 

BY 
G.  P.  PUTNAM'S  SONS 


Knickerbocker  prees,  tAew  Borfe 


TO   ALL  THOSE  WHO   LOVE  TRUTH   AND  JUSTICE  AND   EQUITY,  WHO 
VALUE    OUR    HERITAGE    OF    LIBERTY    AND    PEACEFUL    FRATER- 
NITY,   AND   WHO   ARE  WILLING    TO    UNITE    IN    UPHOLDING 
AND  DEFENDING  THE  COMMONWEALTH— THAT 
PRESERVER   AND    PROTECTOR    OF    THE    RIGHTS 
OF  THE   WHOLE   PEOPLE — THE  AUTHOR 
DEDICATES      THIS      WORK. 


1561273 


PREFACE  TO  THIRD  EDITION. 


IN  preparing  a  new  edition  of  this  work,  ten  years 
after  the  original  was  issued,  it  has  seemed  best  to  reprint 
the  older  portion  of  the  work  substantially  in  its  original 
form,  because,  with  the  exception  of  a  few  minor  points, 
the  facts  which  are  set  forth  in  Chapters  II.  to  IX.  in- 
clusive are  as  true  now  as  they  were  when  this  portion  of 
the  book  was  written,  and  the  discussion  of  these  facts 
which  follows  is  not  only  directly  applicable  to  present 
conditions,  but  is  essential  to  a  clear  understanding  of 
the  problems  which  the  world-wide  movement  toward 
monopoly  has  created. 

To  the  reader  who  follows  this  discussion  at  the  pre- 
sent time,  it  will  be  evident  that  the  economic  history  of 
the  past  decade  is  a  complete  confirmation  of  the  laws 
relating  to  competition  and  the  forces  tending  toward  its 
extinction,  which  the  author  pointed  out  in  his  original 
discussion. 

In  Part  II.  new  material  has  been  added,  presenting  a 
survey  of  the  growth  of  monopolies  in  each  of  the  several 
departments  of  industry  during  the  past  decade,  a  growth 
which  has  been  so  enormous  as  to  fix  the  attention  and 
arouse  the  fears  of  the  public  to  a  greater  extent  than 
has  any  previous  change  in  industrial  or  commercial 


VI 


PREFACE 


methods.  In  this  review  the  author  has  confined  his 
study,  with  few  exceptions,  to  conditions  in  the  United 
States.  He  would  point  out  here,  however,  that  while 
the  movement  toward  the  death  of  competition  all  along 
the  line  has  progressed  much  farther  in  this  country  than 
in  any  other,  it  is  a  movement  world-wide  in  its  extent, 
and  the  problems  which  vex  us  here  are  already  the  sub- 
ject of  discussion  in  all  other  civilized  countries. 

The  most  important  results  of  the  author's  study, 
however,  will  be  found  in  the  three  concluding  chapters 
included  in  Part  III.  He  has  here  set  forth  a  few  of  the 
serious,  yet  little  understood,  economic  evils  with  which 
society  is  now  afflicted,  and  which  are  traceable  to  the 
disappearance  of  competition  in  the  evolution  of  modern 
industry.  Finally,  he  has  outlined  a  few  of  the  founda- 
tion principles  which  must  be  followed  if  society  is  to 
put  itself  in  harmony  with  the  situation  into  which  the 
progress  of  invention  and  the  evolution  of  industry  has 
brought  it. 

Summarized  in  the  fewest  possible  words,  the  author's 
conclusion,  now  as  ten  years  ago,  is  that  the  death  of 
competition  in  a  great  proportion  of  industries  is  inevit- 
able, and  that  government  regulation  is  likewise  inevitable 
as  the  only  possible  protection  of  the  people  against  in- 
dustrial bondage.  He  holds,  however,  that  this  regula- 
tion can  best  be  applied,  not  from  the  outside,  as  is  the 
universal  practice  at  the  present  time,  but  from  the  in- 
side, through  the  representation  of  the  public  in  the 
governing  bodies  of  the  corporations  which  own  and 
manage  all  the  great  monopolies  of  the  present  day. 
While  regulation  in  this  manner  may  seem  at  first  a  revo- 
lutionary proposition,  it  involves  no  greater  interference 
of  the  government  with  industrial  affairs  than  is  already 


PREFACE  Vll 

authorized  by  law  and  precedent.  What  it  does  promise 
to  do  is  to  make  effectual  such  measure  of  government 
control  as  may  be  found  necessary,  whereas  the  present 
method  of  controlling  corporations  by  legislative  enact- 
ments, even  when  aided  by  commissions  empowered  to 
secure  enforcement  of  the  laws,  has  too  often  proved 
ineffective. 

The  author  is  fully  aware  that  great  numbers  of  people 
are  opposed  on  general  principles  to  anything  involving 
increased  interference  of  the  government  with  industry 
and  commerce.  Theories,  however,  cannot  stand  in  the 
way  of  plain  necessity.  The  force  of  circumstances  has 
already  compelled  governments  everywhere  to  assume 
responsibilities  that  were  undreamed  of  a  generation  ago. 
The  author's  plea  is  for  a  frank  recognition  of  the  pres- 
ent state  of  affairs, — of  the  fact  that  the  era  of  free  com- 
petition is  passing  away,  and  that  organized  society  must 
provide  a  substitute  to  take  its  place.  Let  us  fairly  face 
these  new  responsibilities  which  our  governments — fed- 
eral, state,  and  municipal — must  assume.  Let  us  so 
reform  our  systems  of  government  that  these  new  respon- 
sibilities as  well  as  those  already  laid  upon  them  may  be 
successfully  discharged.  Only  in  this  way  may  we  put 
our  social  system  into  harmony  with  modern  industrial 
progress.  Only  thus  may  we  "  pluck  the  flower,  safety, 
out  of  the  nettle,  danger." 

CHARLES  WHITING  BAKER. 

ST.  PAUL  BUILDING,  New  York  City, 
July,  1899. 


PREFACE  TO  FIRST  EDITION. 


IN  the  following  pages  it  has  been  my  endeavor  to 
present,  first,  the  results  of  a  careful  and  impartial  inves- 
tigation into  the  present  and  prospective  status  of  the 
monopolies  in  every  industry  ;  and,  second,  to  discuss  in 
all  fairness  the  questions  in  regard  to  these  monopolies 
— their  cause,  growth,  future  prospects,  evils,  and  reme- 
dies— which  every  thinking  man  is  to-day  asking. 

The  first  part  of  this  task,  the  presentation  of  facts 
with  regard  to  existing  monopolies,  may  seem  to  the 
well  informed  reader  to  be  imperfectly  done,  because  of 
the  host  of  powerful  and  important  monopolies  of  every 
sort  that  are  not  so  much  as  mentioned.  But  I  have 
deemed  it  most  important  that  the  broad  facts  concern- 
ing monopolies  should  be  widely  known  ;  and  I  have, 
therefore,  aimed  to  present  these  facts  in  a  readable  and 
concise  way,  although,  in  so  doing,  only  a  few  of  the  im- 
portant monopolies  in  each  industry  could  be  even  men- 
tioned. It  is  to  be  hoped  that  no  one  will  underrate  the 
importance  of  the  problem  of  monopoly,  or  question  the 
conclusions  which  I  have  reached,  because  of  these 


x  PREFACE. 

omissions.  To  any  such  readers  who  may  not  be  satis- 
fied from  the  facts  hereafter  given  that  monopolies  are 
the  salient  feature  of  our  present  industrial  situation, 
and,  moreover,  that  they  have  come  to  stay,  I  would 
recommend  a  careful  perusal  of  the  financial  and  trade 
journals  for  a  few  months. 

Wherever  possible  I  have  presented  actual  statistics 
bearing  on  the  question  at  issue  ;  but  as  regards  trusts, 
monopolies  in  trade,  mining,  labor,  and  in  fact  nearly  all 
monopolies,  there  are  no  statistics  to  be  had.  Nor  can 
any  be  obtained,  for  it  would  be  absurd  for  the  govern- 
ment to  collect  statistics  of  the  operation  of  that  which  it 
pronounces  illegal  but  makes  no  effort  to  punish. 

It  may  increase  the  respect  of  some  readers  for  the 
conclusions  I  have  reached,  to  know  that  it  was  a  practi- 
cal acquaintance  with  monopolies  rather  than  any  study 
of  economic  theories  which  led  me  to  undertake  the 
present  work  ;  that,  at  the  time  I  undertook  it,  I  was 
wholly  undecided  as  to  the  proper  remedies  for  monopo- 
lies, and  was  quite  willing  to  believe,  if  the  facts  had 
proved  it  to  me,  that  they  were  destined  to  work  their 
own  cure  ;  and  that  the  rapid  growth  and  increase  of 
monopolies  in  very  many  industries,  in  the  few  months 
since  these  chapters  were  written,  have  furnished  fresh 
evidence  that  my  conclusions  have  not  been  amiss. 

Finally,  I  wish  to  place  all  emphasis  on  the  fact  that 
all  the  great  movements  toward  genuine  reform  must  go 
hand  in  hand.  The  cause  of  the  people  is  one  cause,  and 


PREFACE.  xi 

those  who  work  for  honest  officers  in  our  government, 
pure  elections,  the  suppression  of  crime  and  pauperism, 
the  mental  and  moral  elevation  of  men  and  women,  are 
striking  harder  blows  at  monopolies  than  they  may 
realize.  But  if  they  desire  to  hasten  the  day  of  their 
success,  they  must  bring  the  great  masses  of  the  people 
to  comprehend  that  these  movements  aim  at  nothing 
less  than  their  complete  deliverance  ;  and  that  the  re- 
formers who  labor  so  earnestly  to  make  our  government 
purer  and  its  people  nobler,  heartily  desire  also  to  cure 
the  evils  of  monopoly,  and  to  serve  the  cause  of  the 
people  in  its  every  form. 

CHARLES  WHITING  BAKER. 

TRIBUNE  BUILDING,  New  York  City. 
June,  1889. 


TABLE   OF   CONTENTS. 


PART  I. 

AN   INVESTIGATION   OF  THE    LIMITATION  OF 

COMPETITION   IN    MODERN   INDUSTRY  ; 

ITS   CAUSES   AND   EFFECTS. 

I. 

PAGE 

THE  PROBLEM   PRESENTED i 

A  new  use  for  the  word  "  Trust,"  I — The  people's  knowl- 
edge of  trusts,  2 — Remedies  for  trusts,  2,  3 — Trusts  a  species 
of  monopoly,  3 — The  problems  which  monopoly  presents,  4 
— An  impartial  investigation  necessary,  4 — The  question  to 
be  discussed  from  different  standpoints,  5 — A  scientific 
method  for  solving  the  problem,  5. 

II. 

TRUSTS  AND  MONOPOLIES  IN  MANUFACTURING  IN- 
DUSTRIES    ........     7 

Definition  of  a  trust,  7 — The  first  trusts  and  their  suc- 
cessors, 8 — Description  of  the  organization  of  the  linseed- 
oil  trust  by  one  of  its  founders,  9 — The  action  of  trust- 
makers  perfectly  natural,  14 — Actual  effect  of  trusts  upon 
the  public,  15 — Profits  of  the  linseed-oil  trust,  16 — Decreased 
market  for  goods  controlled  by  trusts,  17 — Control  of  the 
labor  market  by  trusts,  17 — The  causes  which  have  produced 
trusts,  18 — Production  on  a  large  scale  the  most  economical, 
20 — The  Standard  Oil  Trust's  defence  of  its  work,  21 — Its 
profits,  and  the  cause  of  its  low  prices,  22 — Industries  in 
which  trusts  have  been  formed,  23 — Andrew  Carnegie's 
views  of  trusts,  24 — The  trust  at  once  a  benefit  and  a  curse,  25. 


xiv  TABLE   OF  CONTENTS. 

III. 

PAGE 

MONOPOLIES  OF  MINERAL  WEALTH        .        .         .26 

Mining  the  first  monopolized  industry,  26 — Monopolies  in 
iron-ore  production,  27 — Monopolies  in  other  metals,  28 — 
The  French  Copper  Syndicate,  29 — The  effect  of  its  action 
on  consumers  of  copper,  31 — Profits  of  the  richest  copper 
mines,  32 — Anthracite-coal  production,  33 — The  anthracite- 
coal  pool,  34 — Coal  monopolies  in  the  West  and  South,  36 — 
Monopolies  in  petroleum  and  natural  gas,  40 — Other  mo- 
nopolies of  this  class,  41. 

IV. 

MONOPOLIES  OF  TRANSPORTATION  AND   COMMUNI- 
CATION         .     42 

Transportation  only  a  necessity  in  modern  times,  42 — 
The  importance  of  railway  traffic,  43 — Railway  transporta- 
tion a  vital  necessity,  43 — Shipping  points  where  competition 
exists  very  few,  44 — Consolidation  and  its  benefits,  45 — In- 
tensity of  competition  in  railway  traffic  on  trunk  lines,  47 — 
Its  inevitable  effect,  48 — The  necessity  of  pools  or  traffic 
agreements,  49 — Their  history,  50 — The  Interstate  Com- 
merce law,  51 — The  effect  of  stimulating  competition,  52 — 
The  evils  charged  to  railway  monopolies,  52 — Evils  due  to 
wasteful  competition,  53 — Monopolies  in  other  forms  of 
transportation,  54 — Monopolies  on  natural  highways,  56 — 
Monopolies  of  bridges,  56 — The  telegraph  monopoly,  56. 

V. 

MUNICIPAL  MONOPOLIES 59 

City  dwellers  dependent  upon  monopolies,  59 — Suburban 
passenger  traffic,  59 — Street-railway  monopolies,  60 — Water- 
supply  monopolies,  61 — Competition  and  monopoly  in  gas 
supply,  62 — T.  M.  Cooley  on  municipal  monopolies,  64 — 
Prices,  cost,  and  profits  of  gas  supply,  64 — Monopolies  in 
electric  lighting  and  in  telegraph,  telephone,  and  messenger 
service,  66 — Other  monopolies  beneath  city  pavements,  67 — 
Monopolies  in  railway  terminals,  68 — Monopoly  in  real 
estate,  69. 


TABLE   OF  CONTENTS.  XV 

VI. 

PAGE 

MONOPOLIES  IN  TRADE 71 

Absolute  control  not  essential  to  a  monopoly,  71 — History 
of  trade  monopolies,  72 — Monopolies  in  country  retail  trade, 
73 — In  city  retail  trade,  74 — In  wholesale  trade,  75 — Co- 
operation of  trusts  and  trade  monopolies,  75 — Monopolies  in 
the  grocery  trade,  76 — Monopolies  in  meat,  77 — A  general 
view,  78 — Monopolies  among  purchasers,  78 — "Corners" 
and  monopolies,  80 — Commercial  exchanges  and  speculation, 
82 — Warehouse  monopolies,  82 — Insurance  monopolies,  83 — 
Trade  monopolies  artificial,  84 — Their  unjust  acts,  85 

VII. 
MONOPOLIES  DEPENDING  ON  THE  GOVERNMENT     .     87 

Government  monopolies  in  ancient  times,  87 — Government 
monopolies  established  for  the  benefit  of  the  people,  88 — 
Copyrights,  88 — Patents,  89 — Evils  arising  from  the  patent 
system,  go — Monopolies  based  on  patents,  91 — The  Bell 
telephone  monopoly,  92 — Government  subsidies,  94 — Rela- 
tion of  the  tariff  to  monopolies,  95 — Origin  of  the  protective 
tariff,  96 — The  tariff  a  secondary  cause  of  trusts,  98 — Re- 
ductions in  the  tariff  as  a  remedy  for  trusts,  99 — Monopolies 
carried  on  directly  by  Government,  100. 

VIII. 
MONOPOLIES  IN  THE  LABOR  MARKET     .         .         .     102 

Classes  of  labor  considered,  102 — Monopolies  of  capital 
and  monopolies  of  labor  compared,  103 — Locomotive  en- 
gineers' strike  on  the  Chicago,  Burlington,  and  Quincy 
Railway,  105 — Effect  of  labor  monopolies  upon  the  people, 
105 — The  history  of  labor,  107 — The  first  trade-unions,  108 
— Laws  against  them,  109 — Labor  organizations  from  the 
laborer's  standpoint,  no — "An  injury  to  one  the  concern 
of  all,"  no — Preserving  the  self-respect  of  the  laborer,  in 
— Repeal  of  unjust  laws,  113 — A  defence  for  the  action  of 
labor  monopolies,  114 — The  underlying  cause  of  labor  mo- 
nopolies, 116 — Limits  to  the  power  of  labor  monopolies,  118. 


xvi  TABLE   OF  CONTENTS. 

IX. 

PAGE 

MONOPOLIES  AND  COMPETITION  IN   OTHER  INDUS- 
TRIES        119 

Occupations  of  the  people,  119 — Proportion  of  the  people 
in  any  way  benefited  by  monopolies,  120 — Proportion  deriv- 
ing the  principal  profits  from  monopolies,  122 — Monopolies 
in  the  professions,  123 — Monopolies  among  the  servant 
classes,  124 — Agricultural  industry,  125 — Can  monopolies  be 
established  there?  126 — A  proposed  fanners' trust,  127 — The 
Grange  and  the  Farmers'  Alliance,  128 — Killing  the  com- 
petition of  oleomargarine,  129 — Monopolies  among  agricul- 
tural laborers,  130 — Proportion  of  the  people  benefited  and 
proportion  injured  by  monopolies,  130— Monopolies  in  the 
use  of  capital  impossible,  131. 

X. 

THE  THEORY  OF  UNIVERSAL  COMPETITION  .         .     133 

The  general  effect  of  monopolies,  133 — Two  sorts  of  rem- 
edies suggested,  134 — Study  of  the  laws  of  competition 
necessary.  135 — The  growth  of  civilized  society  outlined,  136 
— The  interdependence  of  modern  society,  137 — The  theory 
of  civilized  industry,  137 — Supply  and  demand  and  the  un- 
equal rewards  of  men's  industry,  138 — The  theoretical  per- 
fection of  our  social  system,  141 — "Competition  the  life  of 
trade,"  142 — The  orthodox  school  of  political  economy,  143. 

XL 

THE  LAWS  OF  MODERN  COMPETITION    .        .         .145 

Competition  defined,  145— Competition  in  corn-raising, 
146— In  paper-making,  147— In  railway  traffic,  149— The 
laws  governing  competition  deduced,  150—  Monopoly  de- 
nned, 155— Natural  agents  in  production,  156— Different 
classes  of  competition,  157— The  three  salient  causes  of 
monopoly,  159— The  proper  remedy  for  monopoly.  160. 


TABLE   OF  CONTENTS.  xvii 

XII. 

PAGE 

THE  EVILS  DUE  TO  MONOPOLY  AND  INTENSE  COM- 
PETITION         .......     162 

The  theoretical  perfection  of  human  industry,  162 — Over- 
production not  a  fault  of  production,  163 — The  ideal  dis- 
tribution of  wealth,  164 — The  law  of  supply  and  demand, 
165 — Evils  due  to  monopoly  :  the  congestion  of  wealth,  166 
— How  great  fortunes  are  made,  168 — Monopolized  indus- 
tries and  speculation,  169 — How  monopolies  reduce  the  in- 
come of  small  capitalists,  170 — Monopolies  the  cause  of 
over-production,  171 — Monopolies  and  poverty,  173 — The 
Church  and  the  laboring  classes,  173 — Intemperance,  174 — 
Reforms  must  go  hand  in  hand,  174 — How  monopolies  keep 
men  in  idleness,  175 — The  waste  of  competition,  176 — 
Waste  due  to  parallel  railway  lines,  177 — The  waste  of  com- 
petition and  financial  crises,  178 — Wasteful  competition  in 
other  industries,  179 — Waste  by  strikes  of  labor  monopolies, 
1 80 — False  remedies  for  the  disease,  181. 

XIII. 
AMELIORATING  INFLUENCES  .....     183 

Two  classes  of  palliatives  to  the  evils  of  monopoly,  183 — 
Reduction  in  price  to  increase  demand,  184 — The  influence 
of  Christianity,  185 — Its  promise  as  a  remedy,  186 — A  social 
system  based  on  nobler  attributes  than  selfishness,  187 — The 
tendency  of  modern  society,  188 — The  possibilities  of  altru- 
ism. 189 — Direct  and  indirect  charities,  189 — The  benevolent 
spirit  in  business  enterprises,  190 — The  proper  attitude  of 
the  Church  toward  monopolies,  191 — The  fraternal  spirit 
opposed  to  competition,  192 — Monopolists  to  be  judged 
charitably,  193 — Unjust  judgment  of  labor  monopolies,  194 
— Enmity  toward  monopolists  no  cure  for  monopoly,  195. 

XIV. 
REMEDIES  FOR  THE  EVILS  OF  MONOPOLY     .         .     196 

Schemes  for  bettering  society,  196 — The  doctrine  of  indi- 
vidualism, 197 — The  doctrine  of  societism,  198 — The  defects 


xvi  11  TABLE   OF  CONTENTS. 

PAGE 

of  each  when  unmodified  by  the  other,  199 — Societism  a 
necessary  accompaniment  of  civilization,  200 — The  interde- 
pendence of  mankind,  201 — Does  societism  threaten  liberty  ? 
201 — Government  for  the  benefit  of  the  whole  people,  202 — 
The  dangers  of  government  action  to  aid  special  classes, 
202 — Remedies  for  monopoly  :  the  creation  of  new  competi- 
tors. 204 — Its  practical  result,  205 — Remedies  by  prohibiting 
consolidations,  205 — Their  inevitable  effect,  206 — Govern- 
ment the  only  agent  to  prevent  monopoly,  207 — Why  direct 
action  by  the  government  is  impossible,  208 — Indirect  action 
and  its  probable  results,  208 — The  Interstate  Commerce  law 
as  an  example,  209 — The  proper  remedy  for  monopoly  not 
abolition,  but  control,  210 — The  relative  advantages  of  gov- 
ernment and  private  management  of  industry,  211. 

XV. 

THE  SOVEREIGN  RIGHTS  OF  THE  PEOPLE  AND  OF 

THEIR  REPRESENTATIVE,  THE  GOVERNMENT   .     213 

Questions  brought  up  by  the  preceding  conclusion,  213 — 
The  rights  of  property  holders,  214 — Property  in  the  products 
of  labor  an  inherent  right,  215 — Property  in  natural  agents 
.and  public  franchises  a  matter  of  expediency,  216 — Eminent 
•domain  over  natural  agents  still  held  by  the  public,  217 — 
The  laws  of  competition  applicable  to  determine  when  this 
right  should  be  exercised,  220 — Absolutely  perfect  equity 
impossible,  221  —  Does  private  ownership  of  land  work 
injustice?  222  —  Fundamental  difficulties  in  dealing  with 
monopolies  not  dependent  on  natural  agents,  223 — Why  a 
remedy  for  their  evils  is  essential,  224 — The  basis  of  the 
people's  authority  over  these  monopolies,  225 — Government 
regulation  with  private  management  the  only  feasible  plan, 
225. 

XVI. 

PRACTICAL    PLANS    FOR    THE    CONTROL    OF    MO- 
NOPOLIES .         .         .         .         .         .         .227 

Economists  should  unite  on  the  principles  already  pro- 
pounded, 227 — Practical  details  a  matter  of  opinion,  227 — 


TABLE    OF   CONTENTS.  xix 

A  plan  for  the  equitable  and  permanent  adjustment  of  the 
railway  problem,  228 — The  ownership  and  operation  of  the 
railways,  229 — Their  securities  as  investments  and  for  use 
in  connection  with  the  currency,  230 — Readjustment  of  out- 
standing securities,  231 — Lending  the  government's  credit  to 
private  corporations,  232 — How  rates  of  fare  and  freight 
should  be  fixed,  233 — How  the  incentive  to  economy  is 
retained,  234 — How  to  avoid  strikes,  237 — Principles  to  be 
observed  in  establishing  government  control  of  monopolies, 
238 — Plans  for  the  control  of  mineral  monopolies,  238 — 
State  ownership  with  private  operation,  239 — Plans  for  con- 
trolling municipal  monopolies,  240 — The  control  of  other 
monopolies,  244 — The  dangers  of  special  legislation,  244 — 
Government  control  of  manufacturing  enterprises  not  feasi- 
ble, 245 — Taking  trusts  within  the  pale  of  the  law,  247 — 
Enforcing  publicity,  247  —  Enforcing  non-discrimination, 
248 — Direct  action  to  prevent  extortion  by  the  monopoly, 
251 — Potential  competition  to  prevent  extortion,  252 — Re- 
form of  corporation  laws,  254 — The  contrast  between  this 
plan  for  controlling  trusts  and  existing  law,  255 — Reductions 
in  the  tariff  as  a  remedy  for  trusts,  256 — Plans  for  the  con- 
trol of  labor  monopolies,  257 — Strikes  an  injury  to  labor, 
258 — Removal  of  other  monopolies  as  a  cure,  258 — What 
shall  fix  the  rate  of  wages?  259 — Cooperative  ownership,  260 
— Fraternal  benevolence  most  needed  here,  261 — A  definite 
relation  between  monopolies  and  the  people,  262 — Conclu- 
sion, 263. 

PART  II. 

A  DECADE  OF  PROGRESS  TOWARD  THE  DEATH 
OF  COMPETITION. 

INTRODUCTORY        .......     267 

Revolution  in  economic  condition  due  to  invention,  267 — 
Problems  relating  to  distribution  of  wealth  still  to  be 
solved,  268. 


XX  TABLE   OF  CONTENTS. 

I. 

PAGE 

MONOPOLIES  IN  MANUFACTURING  INDUSTRIES       .     269 

Trust  method  of  combination  displaced  by  actual  consolida- 
tions, 269 — List  of  incorporated  combinations  in  manu- 
facturing industries  grouped  by  products,  270-275 — Other 
combinations  among  manufacturers,  276 — Influence  of  de- 
mand for  industrial  stocks  upon  progress  of  consolidations, 
278. 

II. 
MONOPOLIES  OF  MINERAL  WEALTH         .         .         .     279 

Influence  of  manufacturing  combinations  upon  mineral 
monopolies,  279 — Iron  ore,  280 — Coal,  281 — Brick  clay, 
282 — Copper,  282 — Diamonds,  borax,  potash,  quicksilver, 
sulphur,  283 — Stone,  284. 

III. 

MONOPOLIES  OF  TRANSPORTATION  AND  COMMUNI- 
CATION    ........     285 

Disappearance  of  competition  as  a  factor  in  rate  mak- 
ing, 285 — Such  competition  as  still  exists  not  of  public  bene- 
fit, 286 — Present  method  of  fixing  railway  rates  a  haphazard 
one,  286 — Effect  of  Sherman  anti-trust  law,  287 — The 
Texas  plan  for  equitably  adjusting  rates,  287 — Plan  pro- 
posed in  first  edition  (p.  229)  not  applicable  now,  288 — 
Proposal  to  appoint  government  directors,  289 — Water 
transportation  also  subject  to  monopoly,  290 — British 
"  Chambers  of  Shipping,"  290 — International  combinations, 
291 — Ocean  cables,  the  telegraph,  and  telephone,  292 — 
Warehouses,  293 — Express  companies,  294. 

IV. 
MUNICIPAL  MONOPOLIES 295 

Advance  in  public  sentiment,  295 — Purchase  by  cities  of 
private  water  supplies,  296 — Lease  of  Philadelphia  gas 
works,  296 — Competition  in  gas  business  disappearing,  297 


TABLE   OF  CONTENTS.  xxi 


— Consolidation  of  electric-lighting  companies,  297 — Muni- 
cipal electric-lighting  plants,  298 — Value  of  street-railway 
franchises,  298 — Improvement  in  street-railway  service,  299 
— Foreign  practice  in  treating  municipal  monopolies,  300 — 
Acquisition  by  English  cities  of  franchises,  302. 


MONOPOLIES  IN  TRADE  ......     303 

Combinations  among  middlemen,  303 — Growth  of  the 
department  store,  304 — Opposing  views  concerning  it,  305 
— Department  stores  lead  to  monopoly,  306 — Combinations 
among  banks,  307 — Among  insurance  companies,  307 — State 
supervision  of  insurance  companies,  308 — Monopoly  in 
collection  and  sale  of  news,  308. 

VI. 
MONOPOLIES  IN  THE  LABOR  MARKET      .         .         .     310 

Progress  made  by  labor  organizations,  310 — Most  notable 
strikes,  311 — Combinations  among  buyers  of  labor,  312 — 
The  side  of  the  non-union  workman,  312 — Influence  of  labor 
organizations  in  legislation,  313. 

PART   III. 

EVILS      WROUGHT      BY     RECENT      ECONOMIC 
CHANGES,     AND     PRACTICAL     SUGGES- 
TIONS   FOR    THEIR    REMEDY. 

I. 

CERTAIN  EVILS  IN  MODERN  INDUSTRIAL  LIFE        .     317 

Transfer  of  industry  to  corporations,  318 — Loss  of  inde- 
pendence, 318 — Disappearance  of  old  relation  of  master 
and  servant,  319 — Owners  no  longer  concerned  for  welfare 
of  employees,  319 — Divorcement  of  ownership  from  con- 
trol, 320 — State  recognition  of  this,  321 — Temptations  of 
corporation  managers,  322 — Stock  speculations,  323 — Trust 


xxii  TABLE   OF  CONTENTS. 

PAGE 

organization  tends  to  foster  stock  manipulations,  324 — 
Transfer  of  industry  to  Wall  Street  control,  324 — Moral 
character  of  men  in  control  of  industries,  325 — Increase  of 
non-resident  proprietorship  in  manufactories,  326 — When 
does  labor-saving  machinery  not  benefit  labor  ?  327 — The 
trust  itself  a  great  labor-saving  machine,  328 — The  problem 
of  the  unemployed,  329 — Workmen  no  longer  own  their 
homes,  330 — Low  rate  of  interest  on  savings-bank  invest- 
ments, 331 — The  system  at  fault  and  not  the  people,  332. 

II. 

WHAT  SHALL  WE  Do  WITH  MUNICIPAL  MONOPO- 
LIES ?        .  .     333 

Battle  for  public  control  of  municipal  monopolies  already 
won,  334 — Consolidation  proved  that  competition  cannot 
protect  the  public,  334 — Will  companies  reduce  rates  to  in- 
crease profits  ?  335 — The  true  principle  for  fixing  rates 
charged  by  franchise  corporations,  336 — The  result  of  reck- 
less granting  of  franchises  by  cities,  337 — Franchise  com- 
panies a  chief  cause  of  municipal  corruption,  338 — Dishonesty 
in  the  management  of  private  corporations,  339 — Compara- 
tive efficiency  of  public  and  private  management  of  public 
works,  340 — Controversy  over  value  of  franchises  in  the 
acquirement  by  a  city  of  works  owned  by  a  franchise  cor- 
poration, 341 — Compulsory  reduction  of  rates  should  precede 
purchase  of  franchises,  343 — The  rights  of  property,  344 — 
The  movement  toward  municipal  ownership  of  public  works, 
345 — Increasing  responsibilities  of  city  governments  tends 
toward  their  improvement,  346. 

III. 
WHAT  SHALL  WE  Do  WITH  THE  TRUSTS  ?       .         .     347 

Why  the  trusts  of  the  present  day  are  permanent,  347 — 
Financial  strength  of  the  trusts,  348 — Can  independent  pro- 
ducers compete  against  trusts  ?  349 — Trusts  often  oppressive 
even  when  competition  exists,  351 — The  key  to  public  con- 


TABLE   OF  CONTENTS.  xxiii 


trol  of  the  trusts,  352 — Unlimited  grants  of  power  to  cor- 
porations a  great  experiment,  353 — State  restrictions  upon 
foreign  corporations  undesirable,  354 — Need  of  a  national 
incorporation  law,  354 — Abolition  of  trust  combinations  un- 
wise, 355 — U.  S.  Supreme  Court  decisions  showing  power 
of  commonwealth  to  regulate  any  monopoly,  356 — Reduction 
of  capitalization  of  trusts,  356 — Publicity  of  trust  affairs,  357 
— Taxing  stock  transfers,  357 — Government  directors  for 
trust  corporations,  358 — Such  action  not  interference  with 
private  business,  359 — Government  directors  a  benefit  to 
trust  stockholders,  360 — Reform  in  governmental  systems 
imperative,  360 — Evils  of  government  not  the  fault  of  the 
people  but  of  the  system,  361 — Government  control  the  only 
possible  protection  of  the  people,  362. 


PART   I. 

AN  INVESTIGATION  OF  THE  LIMITATION 
OF  COMPETITION  IN  MODERN  INDUS- 
TRY; ITS  CAUSES  AND  EFFECTS. 


MONOPOLIES 


THE   PEOPLE 


i. 

THE   PROBLEM   PRESENTED. 

THE  word  "trust,"  standing  for  one  of  the  noblest 
faculties  of  the  heart,  has  always  held  an  honorable 
place  in  our  language.  It  is  one  of  the  strange  occur- 
rences by  which  languages  become  indelible  records  of 
great  facts  in  the  history  of  the  world,  that  this  word  has 
recently  acquired  a  new  meaning,  which,  to  the  popular 
ear  at  least,  is  as  hateful  as  the  old  meaning  is  pleasant 
and  gratifying. 

Some  future  generation  may  yet  be  interested  in 
searching  out  the  fact  that  back  in  the  nineteenth 
century  the  word  "  trust "  was  used  to  signify  an  obnox- 
ious combination  to  restrict  competition  among  those 
engaged  in  the  same  business  ;  and  that  it  was  so  called 
because  the  various  members  of  the  combination  en- 
trusted the  control  of  their  projects  and  business  to  some 
of  their  number  selected  as  trustees.  We  of  the  present 
day,  however,  are  vitally  interested  in  a  question  far 
more  important  to  us  than  the  examination  of  a  curiosity 
of  philology.  We  are  all  of  us  directly  affected  to-day 


2  MONOPOLIES  AND    THE  PEOPLE. 

by  the  operation  of  trusts  ;  in  some  cases  so  that  we  feel 
the  effect  and  rebel  under  it ;  in  other  cases,  so  that  we 
are  unconscious  of  their  influence  and  pay  little  heed  to 
their  working. 

It  is  but  a  few  months  since  public  attention  was 
directed  to  the  subject  of  trusts  ;  but,  thanks  to  the 
widespread  educational  influence  of  the  political  cam- 
paign, at  the  present  day  the  great  proportion  of  the 
voters  of  the  country  have  at  least  heard  of  the  existence 
of  trusts,  and  have  probably  some  idea  of  their  working 
and  their  effect  upon  the  public  at  large.  They  have 
been  pointed  out  as  a  great  and  growing  evil ;  and  few 
speakers  or  writers  have  ventured  to  defend  them  farther 
than  to  claim  that  their  evil  effects  were  exaggerated, 
and  predict  their  early  disappearance  through  natural 
causes  ;  but  while  remedy  after  remedy  has  been  sug- 
gested for  the  evil  so  generally  acknowledged,  none 
seems  to  have  met  with  widespread  and  hearty  approval, 
and  practically  the  only  effect  thus  far  of  the  popular 
agitation  has  been  to  warn  the  trust  makers  and  trust 
owners  that  the  public  is  awakening  to  the  results  of  their 
work  and  is  likely  to  call  them  to  account. 

The  truth  is,  as  we  shall  see  later,  that  it  is  a  difficult 
matter  to  apply  an  effective  remedy  of  any  sort  to  the 
trusts  by  legislation,  without  running  counter  to  many 
established  precedents  of  law  and  custom,  and  without 
serious  interference  with  what  are  generally  regarded  as 
inalienable  rights.  Yet  we  are  making  the  attempt. 
Already  legislative  and  congressional  committees  have 
made  their  tours  of  investigation,  and  bills  have  been 
introduced  in  the  legislatures  of  many  of  the  States,  and 
in  Congress,  looking  to  the  restriction  or  abolition  of  trust 
monopolies. 


THE  PROBLEM  PRESENTED.  3 

It  is  the  wise  surgeon,  however,  who,  before  he  takes 
the  knife  to  cut  out  a  troublesome  growth,  carefully  diag- 
noses its  origin  and  cause,  determines  whether  it  is 
purely  local,  or  whether  it  springs  from  the  general  state 
of  the  whole  body,  and  whether  it  is  the  herald  of  an 
organic  disease  or  merely  the  result  of  repressed  ener- 
gies or  wrongly-trained  organs.  So  we,  in  our  treatment 
of  the  body  politic,  will  do  well  to  examine  most  care- 
fully the  actual  nature  of  the  diseases  which  we  seek  to 
cure,  and  discern,  if  we  can,  the  causes  which  have 
brought  them  on  and  tend  to  perpetuate  them.  If  we 
can  discover  these,  we  shall,  perhaps,  be  able  to  cure 
permanently  by  removing  the  ultimate  cause.  At  any 
rate,  our  remedies  will  be  apt  to  reach  the  disease  far 
more  effectually  than  if  they  were  sought  out  in  a  hap- 
hazard way. 

The  crudest  thinker,  at  the  first  attempt  to  increase 
his  knowledge  of  the  general  nature  of  trusts,  discovers 
that  the  problem  has  a  close  connection  with  others 
which  have  long  puzzled  workers  for  the  public  good. 
Trusts  ally  themselves  at  once  in  his  mind  with  monopo- 
lies, in  whichever  form  he  is  most  familiar  with  them, 
and  are  apt  to  be  classed  at  once,  without  further  con- 
sideration, as  simply  a  new  device  for  the  oppression  of 
the  laborer  by  the  capitalist.  But  the  man  of  judicious 
and  candid  mind  is  not  content  with  any  such  conclu- 
sion ;  he  finds  at  once,  indeed,  that  a  trust  is  a  combina- 
tion to  suppress  competition  among  producers  of  manu- 
factured goods,  and  he  calls  to  mind  the  fact  that  other 
combinations  to  suppress  competition  exist  in  various 
other  lines  of  industry.  Surely  when  the  governing 
motives  are  so  similar,  the  proper  remedies,  if  remedies 
are  needed,  cannot  be  greatly  unlike.  And  though^ 


4  MONOPOLIES  AND  THE  PEOPLE. 

taking  the  country  as  a  whole,  trusts  have  occupied  more 
attention  lately  than  any  other  form  of  monopoly,  the 
problem  of  railroad  monopoly  is  still  all-absorbing  in  the 
West ;  in  every  city  there  is  clamor  against  the  burdens 
of  taxation  levied  by  gas,  electric-light,  street-railway, 
and  kindred  monopolies  ;  while  strikes  in  every  industry 
testify  to  the  strength  of  those  who  would  shut  out  com- 
petition from  the  labor  market.  These  and  similar  social 
and  industrial  problems  are  quite  as  important  as  the 
problem  of  trusts,  and  their  solution  is  becoming  every 
day  more  urgent  and  necessary.  If  we  neglect  them  too 
long,  or  carelessly  adopt  some  unsuitable  or  unjust  rem- 
edy, who  knows  the  price  we  may  pay  for  our  folly  in 
blood  and  treasure  ? 

The  problem  before  us,  then,  as  we  see  it  from  our 
present  standpoint,  is  the  problem  of  monopoly.  What 
is  it  ?  Whence  comes  it  ?  What  are  its  effects  ?  And, 
most  important  of  all,  what  ought  we  to  do  about  it  ? 
Surely  questions  whose  correct  answer  is  of  such  im- 
portance to  the  welfare  of  each  person  and  to  the  very 
existence  of  society  demand  the  careful  consideration  of 
every  thinking  man. 

Let  us  then  take  up  this  problem  and  give  it  the  fairest 
and  most  candid  investigation  possible.  In  order  to  do 
this,  let  us  remember  that  the  truth  is  the  object  of  our 
search,  and  that  it  will  be  necessary,  if  the  conclusions 
from  our  investigation  are  to  be  of  value,  that  we  divest 
ourselves,  so  far  as  possible,  of  all  preconceived  opinions 
founded,  perhaps  unconsciously,  on  the  statements  or 
evidence  of  incompetent  authorities,  and  also  of  all  preju- 
dices. Let  us,  in  searching  for  facts  and  principles,  ex- 
amine with  impartiality  the  evidence  and  arguments  which 
each  side  presents,  and  judge  with  candor  between  them. 


THE  PROBLEM  PRESENTED.  5 

The  author  wishes  to  make  an  earnest  personal  request 
to  the  reader  who  is  minded  to  follow  the  discussion 
through  the  following  pages,  that  he  will  in  good  faith 
attempt  to  do  this  thing  :  that  he  will  lay  aside  for  the 
present  his  opinions  already  formed,  as  the  author  him- 
self has  conscientiously  aimed  to  do  while  pursuing  this 
investigation,  and  give  a  fair  hearing  to  both  sides  of  the 
question.  A  complicated  machine  can  only  be  under- 
stood when  it  is  viewed  from  different  standpoints.  So, 
here,  in  order  to  find  the  truth,  we  must  examine  trusts 
from  the  standpoint  of  the  trust  maker  as  well  as  from 
that  of  the  consumer  ;  and  trade  unions,  from  the  stand- 
point of  their  members  as  well  as  from  the  ground  of 
employers  and  of  the  public  at  large.  We  shall  indeed 
meet  much  error  by  this  method  of  study,  but  is  it  not 
proverbial  that  there  are  two  sides  to  every  question  ?  It 
will  be  our  task  to  study  these  opposing  views  and  sift 
from  them  the  truths  for  which  we  seek. 

In  taking  up  now  the  problem  before  us,  let  us  adopt 
the  true  scientific  method  for  its  solution.  We  must  first 
find  out  as  fully  as  possible  the  actual  facts  with  regard 
to  monopolies  of  every  sort  and  the  competition  which 
monopoly  replaces.  Next,  by  discussing  and  comparing 
the  evidence  obtained,  we  may  be  able  to  discover  the 
natural  laws  by  which  competition  and  monopoly  are 
controlled  ;  and  finally,  with  our  knowledge  of  these,  we 
will  try  to  discover  both  the  source  of  the  evils  which 
vex  us  and  the  proper  methods  for  ameliorating,  curing, 
or  preventing  them,  whichever  may  be  found  possible. 

Such  is  the  outline  of  the  investigation  before  us, 
which  it  may  as  well  be  said  here  could  easily  be  ex- 
tended and  amplified  to  fill  many  volumes.  The  author 
has  preferred  to  prepare  the  present  volume  without  such 


6  MONOPOLIES  AND  THE  PEOPLE. 

amplification,  believing  that  the  busy  men  of  affairs,  to 
whom  a  practical  knowledge  of  the  subjects  herein 
treated  is  most  essential,  have,  as  a  rule,  no  leisure  for  the 
extended  study  which  the  volumes  into  which  the  pres- 
ent one  might  easily  be  expanded  would  require.  He 
trusts,  however,  that  brevity  will  no);  be  found  wholly  in- 
compatible with  thoroughness  ;  and  that  the  fact  that 
much  which  might  have  properly  been  included  in  the 
book  is  omitted,  will  not  be  taken  as  a  necessary  indica- 
tion that  the  conclusions  arrived  at  are  without  value. 


II. 


TRUSTS  AND  MONOPOLIES  IN  MANUFACTURING 
INDUSTRIES. 

IN  common  use  the  word  "  trust  "  is  at  present  rather 
loosely  used  to  denote  any  combination  formed  for  the 
purpose  of  restricting  or  killing  competition.  Properly 
speaking,  however,  a  trust  is  a  combination  to  restrain 
competition  among  producers,  formed  by  placing  the 
various  producing  properties  (mills,  factories,  etc.)  in  the 
hands  of  a  board  of  trustees,  who  are  empowered  to 
direct  the  operations  of  production  and  sale,  as  if  the 
properties  were  all  under  a  single  ownership  and  man- 
agement. 

The  novel  characteristic  of  the  trust  is  not  the  fact 
that  it  is  a  monopoly,  but  that  it  is  a  monopoly  formed 
by  combining  several  competitors  according  to  a  new 
plan.  The  process  of  placing  property  in  the  hands  of 
trustees  is  familiar  to  every  business  man.  In  the  forma- 
tion of  a  trust  the  different  firms  or  companies  who  have 
been  competing  with  each  other  in  the  production  and 
sale  of  goods  agree  to  place  the  management  of  all  their 
several  properties  in  the  hands  of  a  board  of  trustees. 
The  powers  of  this  board  and  its  relation  to  the  owners 
of  the  various  properties  are  ingeniously  devised  to 
evade  the  common  law,  which  declares  that  contracts  in 

7 


8  MONOPOLIES  AND  THE  PEOPLE. 

restraint  of  competition  are  against  public  policy,  and 
illegal. 

The  first  of  the  modern  trusts  was  the  Standard  Oil  Trust, 
which  was  a  combination  formed  among  several  of  the  re- 
finers of  crude  petroleum  in  the  States  of  Pennsylvania 
and  Ohio  in  the  year  1869.  The  original  combination 
grew  out  of  the  control  of  certain  important  patents  con- 
nected with  the  process  of  refining.  It  pursued  its  course 
for  a  number  of  years  without  attracting  much  attention 
outside  of  the  centre  of  its  operations  ;  but  of  late  years 
so  much  has  been  published  in  regard  to  it  that  the  very 
word  "  Standard  "  has  come  to  be  almost  a  synonym  for 
monopoly.  It  is  probable  that  certain  branches  of  the 
iron  and  steel  trade  were  the  next  to  be  combined  by 
means  of  a  trust,  but  as  these  were  arrangements  between 
private  firms,  not  much  information  as  to  the  time  of 
their  origin  has  reached  the  public.  The  second  great 
trust  to  attract  general  public  attention  was  the  Ameri- 
can Cotton  Oil  Trust,  in  which  some  of  the  same  men 
who  have  so  successfully  engineered  the  Standard  Oil 
combination  are  heavily  interested.  These  two  great 
trusts,  the  Cotton  Oil  and  the  Standard,  have  attracted 
widespread  attention,  and,  to  a  certain  extent,  the  public 
has  become  familiar  with  their  organization  and  plan  of 
operation  ;  but  popular  feeling  on  the  subject  was  not 
fully  aroused  until  1887,  when  the  newspapers  of  the 
country  made  generally  known  the  fact  that  the  trust 
principle  of  combination  was  being  rapidly  adopted  by 
the  manufacturers  of  a  large  number  of  important  lines 
of  goods.  The  effect  which  these  monopolies  were  be- 
lieved to  have  upon  the  public  welfare  was  pointed  out 
by  writers  and  speakers,  and  Congress  and  the  State 
Legislatures  were  besought  to  investigate  these  combina- 


TRUSTS  AND  MONOPOLIES.  g 

tions,  and  seek  to  suppress  them.  Meanwhile  it  seems  to 
be  true  that  the  popular  agitation  has  had  no  effect  in  less- 
ening the  number  of  trusts,  or  checking  their  formation 
and  growth  ;  and  they  continue  to  increase  and  to  gather 
their  profits,  while  the  public  impotently  wonders  what 
it  is  going  to  do  about  it.  Let  us  be  careful,  however,  to 
make  no  assumption  that  the  trust  is  injurious  to  the 
public  at  large.  That  is  a  matter  which  is  before  us  for 
investigation. 

It  is  safe  to  assume  that  the  reader  is  somewhat 
familiar  with  the  general  charges  which  have  been 
brought  against  the  trusts  ;  but  even  if  this  side  of  the 
story  has  not  been  heard,  it  is  not  unfair  to  look  at  them 
first  from  the  standpoint  of  the  men  who  make  and 
manage  them.  In  order  to  do  this,  suppose  we  select 
some  particular  trust  which  will  serve  as  a  type,  and 
imagine  that  some  frank,  candid  manufacturer,  who  is  a 
member  of  this  trust,  comes  before  us  to  give  an  account 
of  its  formation  and  operations.  This  man  comes,  we 
suppose,  not  as  an  unwilling  informant,  or  as  one  on 
trial.  He  is  frank,  honest,  and  plain-spoken.  He  talks 
as  man  to  man,  and  gives  us,  not  the  specious  argument 
of  an  eloquent  pleader  in  defence  of  trusts,  but  just  that 
view  of  his  trust  and  its  work  that  his  own  conscience 
impels  him  to  take.  Certainly,  then,  he  deserves  an  im- 
partial hearing. 

A  number  of  years  ago  the  principal  manufacturers  of  linseed  oil 
in  the  United  States  formed  an  association.  It  was  started  largely 
for  social  ends,  and  was  very  successful.  Business  men  are  generally 
most  interested  in  their  own  plans  and  operations  ;  and  those  who  are 
familiar  with  the  same  topics  and  have  similar  interests  and  purposes 
are  apt  to  make  agreeable  companions  for  each  other.  We  discussed 
many  points  connected  with  the  management  of  our  business  at  the 


10  MONOPOLIES  AND  THE  PEOPLE. 

meetings,  and  by  interchanging  with  each  other  our  views  and  ex- 
periences with  different  devices,  methods  of  management,  etc.,  we 
were  able  to  get  much  valuable  information,  as  well  as  social  pleasure, 
from  meeting  one  another. 

Now  within  the  past  few  years  things  have  been  going  from  bad  to 
worse  with  the  manufacturers  of  linseed  oil.  The  long  and  short  of 
it  all  was  that  the  margin  between  the  cost  of  the  raw  seed  and  run- 
ning our  mills,  and  what  we  could  get  for  the  oil  cake  and  the  linseed 

011  in  the  market,  has  grown  exceedingly  narrow.     It 's  hard  to  tell  just 
what  has  caused  it.     They  say  over-production  ;  but  what  has  caused 
the  over-production  ?     One  thing  that  may  have  had  something  to  do 
with  it  is  the  new  mills  they  have  been  putting  up  in  the  Northwest. 
Many  of  the  Eastern  mills  used  to  get  large  quantities  of  seed  from 
Iowa  ;  but  they  are  building  cities  out  there  now,  as  well  as  raising 
flax-seed,  and  when  they  were  booming  some  of  those  cities  they  would 
raise  heavy  bonuses  in  aid  of  new  enterprises.     Among  these  were 
some  great  linseed  oil  mills,  which  have  loaded  up  the  market  pretty 
heavily  of  late  years  ;  so  that  not  only  has  the  price  sagged  down,  but 
we  have  all  had  to  work  to  get  rid  of  our  stocks.     The  firms  which 
had  the  best  mills  and  machinery,  and  were  in  a  position  to  get  their 
seed  reasonably  and  put  their  goods  on  the  market  with  least  expense 
for  transportation,  etc.,  have  been  making  a  small   profit  over  and 
above  their  expenses.     But  some  of  the  works  which   had  to  bring 
their  seed  a  long  way,  and  which  have  n't  quite  as  good  machinery  as 
can  be  had  now,  were  in  a  bad  way.     There  were  some  of  the  oldest 
houses  in  the  trade  among  them,  too,  and  with  fine   men    at  their 
head.     It  was  too  bad  to  have  them  go  under.     They  tried  to  cut 
down  expenses,  but  strikes  and  trouble  with  their  men  prevented  their 
saving  much  in  that  way.     Then    there   was   one   item   of  expense 
which  they  had  to  increase  instead  of  cutting  down  :  that  was  the  cost 
of  marketing.     Competition  was  so  fierce,  that,  in  order  to  k£ep  up 
their  trade,  they  had  to  spend  more  on  salaries  of  expensive  salesmen, 
and  in  advertising  and  pushing  their  goods,  than  they  would  dream  of 
ordinarily. 

It  seemed  too  bad  to  cut  each  other's  throats  in  that  way,  for  that 
was  what  it  amounted  to,  and  when  the  association  met, — or  what  was 
left  of  it,  for  the  business  rivalries  had  grown  so  bitter  that  many  of 
the  former  personal  friendships  between  the  members  had  become 
strained  and  one  after  the  other  had  dropped  out, — the  situation 


TRUSTS  AND  MONOPOLIES.  II 

was  discussed  by  the  few  members  who  met  together.  It  was  dis- 
cussed earnestly,  too,  by  men  who  felt  an  interest  in  what  they  said, 
because  unless  some  remedy  could  be  devised,  they  had  got  to  sit  still 
and  watch  the  savings  of  a  lifetime  slip  through  their  fingers.  One 
thing  was  very  clear  to  all.  Though  competition  was  as  sharp  as  any 
one  could  possibly  wish,  the  public  was  not  getting  such  a  wonderful 
benefit  after  all.  Prices  were  not  so  very  much  lower  for  oil,  nor 
higher  for  seed.  It  was  the  selling  expense  which  had  run  up  to  a 
ruinous  figure  ;  and  on  one  point  all  the  members  were  unanimous, — 
that  if  all  the  firms  in  the  trade  could  only  work  together  in  harmony 
in  marketing  their  goods,  they  could  save  enough  in  salesmen's 
salaries,  etc.,  to  make  a  great  difference  in  the  profit-and-loss  account 
without  affecting  the  selling  prices  in  the  market  one  penny. 

Another  very  important  matter,  which  we  had  to  handle  pretty 
tenderly  in  our  discussions,  was  that  of  adulteration.  I  must  confess 
that  a  good  many  firms  in  the  trade,  who  used  to  be  above  any  thing  of 
the  sort,  have  been  marketing  some  goods  in  the  past  few  years  which 
were  not  exactly  the  "pure  linseed  oil"  which  they  were  labelled. 
It  's  a  mean  business — adulteration, — but  not  many  of  our  customers 
ever  test  their  purchases.  The  one  thing  they  are  apt  to  look  at  is 
price,  for  they  are  buying  to  sell  again  ;  and  when  rivals  are  selling  a 
cheaper  oil  that  seems  just  as  good  until  it  is  laid  on  as  the  pure  lin- 
seed that  you  are  obliged  to  ask  a  higher  price  for,  the  temptation  to 
meet  them  at  their  own  game,  rather  than  lose  your  old  customers,  is 
a  very  strong  one.  Certainly,  when  competition  took  this  form,  it 
hurt  the  public  even  more  than  it  hurt  us.  When  people  wish  to  buy 
pure  linseed  oil  they  ought  to  have  some  prospect  of  getting  it,  instead 
of  getting  an  adulterated  mixture  of  various  substances  ;  but  at  the 
rate  competition  was  running,  there  seemed  to  be  small  prospect  that 
there  would  be  any  really  pure  linseed  oil  put  on  the  market  in  a 
short  time.  We  have  often  discussed  the  possibility  of  stopping  these 
adulterations,  but  it  was  a  hard  matter  to  cure  by  mere  mutual  agree- 
ment. How  do  I  know  what  my  competitor  in  a  city  a  hundred  miles 
away,  does  with  the  vats  in  his  cellar  after  working  hours,  even  if  he 
has  solemnly  agreed  not  to  adulterate  his  goods  ?  For  I  must  confess 
that  there  are  a  few  men  in  our  trade  who  are  as  tricky  as  horse 
jockeys. 

Quite  a  number  of  improvements  have  been  patented  in  linseed  oil 
machinery  in  the  past  twenty  years.  Nothing  wonderful,  but  things 


12  MONOPOLIES  AND   THE   PEOPLE. 

that  effect  little  economies  in  the  manufacture.  \Ve  could  have  done 
without  them  ;  but  when  a  few  firms  took  them  up,  of  course  the  rest 
had  to  follow  suit,  or  fall  behind  in  the  race  of  competition.  We 
have  had  to  pay  a  heavy  royalty  on  some  of  these  machines,  and  it  has 
l>een  rather  galling  to  count  out  our  hard-earned  dollars  to  the  com- 
pany which  has  bought  up  most  of  the  patents,  and  is  making  100  per 
cent,  a  year  on  what  it  paid  for  them,  with  no  risk,  and  without  doing 
a  stroke  of  work.  Now  if  we  manufacturers  could  work  in  harmony, 
we  could  make  this  company  come  down  from  their  high  horse,  and 
they  would  have  to  ask  a  reasonable  price  for  their  machines.  But  we 
could  do  more  than  this.  It  stands  to  reason  that  a  good  many  im- 
provements will  be  made  in  our  machinery  in  the  future.  We  don't 
object  to  paying  a  fair  price  to  any  inventor  who  will  work  out  these 
new  ideas  for  us  ;  but  it  does  seem  unjust  for  him  to  go  and  sell  them 
to  some  outside  company  for  a  song,  and  have  that  company  bleed 
the  users  of  the  improvement  for  every  ounce  they  will  stand.  Now, 
by  working  together,  we  can  refuse  to  pay  royalties  on  any  thing  new 
which  comes  up  ;  but  require,  instead,  that  any  new  patent  in  our 
line  be  submitted  to  a  committee,  who  will  examine  and  test  it ;  and 
if  they  find  it  to  be  of  value,  will  purchase  it  for  the  use  of  all  mem- 
bers of  the  association. 

Some  of  the  members  thought  this  was  as  far  as  we  ought  to  go. 
They  were  opposed  to  "trusts"  on  principle.  But  the  great  majority 
saw  so  clearly  where  we  could  continue  to  better  ourselves  that  they 
became  enthusiastic  over  it. 

Some  speculators,  in  years  of  short  crops,  have  occasionally  tried  to 
"corner"  flax-seed  in  a  small  way.  We  could  refuse  to  buy  except 
directly  from  the  growers,  and  that  branch  of  speculation  would  be  a 
thing  of  the  past.  We  have  sent  out  some  pretty  sharp  men  as  buyers, 
and  sometimes  they  have  bought  flax-seed  in  some  of  the  backwoods 
districts  at  very  low  rates.  At  other  times,  two  buyers  from  rival 
firms  have  run  counter  to  each  other,  and  paid  prices  larger  than  their 
employers  could  really  afford.  But  with  our  combination,  we  cannot 
only  fix  uniform  prices  for  seed,  but  we  can  send  out  only  enough 
buyers  to  cover  the  territory  ;  and  the  work  of  buying  is  reduced  to 
simply  inspecting  and  weighing  the  seed. 

Now  another  thing ;  Of  course,  not  every  manufacturer  in  the 
business  owns  his  mills.  It  is  a  fact  that  since  the  close  times  of  the 
past  few  years  the  majority  of  the  firms  are  carrying  mortgages  on 


TRUSTS  AND  MONOPOLIES.  13 

their  mills  ;  and  some  of  them  in  the  West  are  paying  as  high  as  eight 
•or  ten  per  cent,  interest.  But  with  the  combined  capital  of  all  the 
firms  in  the  trade  at  our  back,  we  can  change  all  that.  Either  by  a 
guaranty,  or  by  assuming  the  obligations,  we  can  bring  the  interest 
charges  on  every  mill  in  the  association  down  to  four  or  five  per  cent, 
at  most. 

We  have  been  paying  enormous  rates  to  fire  insurance  companies. 
They  are  not  as  familiar  with  our  business  as  we  are  ourselves,  and 
they  don't  know  just  how  much  risk  there  really  is  ;  so  they  charge  us 
a  rate  which  they  make  sure  is  high  enough.  We  can  combine 
together  and  insure  ourselves  on  the  mutual  plan  ;  and  by  stipulating 
that  each  firm  shall  establish  and  keep  up  such  precautions  against 
fire  as  an  expert  may  direct,  we  can  not  only  reduce  the  cost  of  our 
insurance  to  that  of  our  actual  losses,  but  we  can  make  these  a  very 
small  amount. 

It  may  be  said  that  we  might  have  done  all  these  things  without 
forming  any  trust  to  control  prices.  But  the  practical  fact  was  that 
we  could  not.  There  was  so  much  "bad  blood"  between  some  of 
the  different  firms  in  the  business,  from  the  rivalry  and  the  sharp 
competition  for  trade,  that  as  long  as  that  was  kept  up  it  was  impossi- 
ble to  get  them  to  have  any  thing  to  do  with  each  other  in  a  business 
way.  It  was  no  small  task  to  get  these  old  feuds  patched  up  ;  but 
some  of  the  best  and  squarest  men  in  the  business  went  right  into  the 
work,  and  at  meetings  of  the  association,  and  privately,  exerted  all 
their  influence  to  forward  this  coming  together  for  mutual  aid  and 
protection.  They  did  it  conscientiously,  too,  I  think,  believing  that 
it  was  necessary  to  save  many  of  us  from  financial  ruin  ;  and  that  we 
were  not  bound,  under  any  circumstances,  to  sacrifice  ourselves  for 
the  sake  of  the  public.  The  trust  has  been  formed,  as  every  one 
knows,  and  many  of  the  things  we  planned  to  do  have  been  already 
accomplished.  We  have  stopped  adulterations  on  all  goods  made  by 
members  of  the  trust  ;  and  the  improvement  in  the  quality  of  linseed 
oil  which  has  been  effected  is  an  important  benefit  to  the  public. 
We  are  managing  all  the  works  in  the  trust  as  if  it  were  all  a  single 
property,  controlled  by  different  managers  ;  and  the  saving  in  expense, 
over  the  old  plan  of  cut-throat  competition,  when  everybody  was 
striving  to  save  himself  and  sink  his  rivals,  is  an  enormous  one. 

One  thing  which  has  caused  much  hue  and  cry,  is  the  fact  that  we 
have  closed  half  a  dozen  mills  or  so.  But  the  matter  stood  in  this 


14  MONOPOLIES  AND  THE  PEOPLE. 

way  :  these  mills  were  not  favorably  situated  for  doing  business,  all 
things  considered  ;  and  all  the  mills  in  the  country  cannot  run  all  the 
time,  because  there  are  more  mills  in  existence  than  are  needed  to 
supply  the  market.  These  mills  must  have  been  closed  soon,  if  the 
trust  had  not  commenced  operations,  because  they  could  not  be  run 
under  the  old  regime  and  pay  expenses.  We  knew  we  could  make 
the  oil  at  a  less  cost  in  our  other  mills,  so  we  concluded  to  buy  out  the 
owners  of  these  at  a  fair  price,  and  shut  up  the  works.  Prices  of  lin- 
seed oil  have  been  raised  somewhat,  we  confess  ;  but  we  claim  that 
they  had  been  forced  down  much  too  low,  by  the  excessive  competition 
which  has  prevailed  for  a  few  years  past.  Of  course  some  of  the  most 
hot-headed  and  grasping  among  us,  were  anxious  to  force  prices  away 
up,  when  they  once  realized  that  we  had  an  absolute  monopoly  of  the 
linseed  oil  trade  of  the  country  ;  but  the  great  majority  were  practically 
unanimous  in  a  demand  for  just  prices  only,  and  the  adoption  of  the 
policy  of  live  and  let  live  ;  for  trust-makers  are  not  entirely  selfish. 

We  claim,  moreover,  that  we  are  breaking  no  legal  or  moral  law  by 
this  action.  We  are,  for  the  most  part,  private  parties  or  firms — but 
few  corporations, — hence  the  attempt  to  abolish  trusts  on  the  ground 
that  the  corporations  composing  trusts  have  exceeded  the  power  given 
by  their  charters  will  fail  to  reach  our  case.  We  have  certainly  done 
this :  we  have  killed  competition  in  the  linseed  oil  trade  ;  but  we 
submit  that  with  so  many  other  interests  and  trades  organized  to  pro- 
tect themselves  from  outside  competition,  and  control  the  prices  at 
which  their  products  are  sold  to  the  public,  we  were,  in  self-defence 
and  for  our  own  preservation,  obliged  to  take  this  step.1 

If  we  omit  the  references  to  the  especial  trade,  the 
above  view  of  a  trust  from  the  trust-makers'  standpoint 
will  do  for  almost  any  of  the  many  combinations  which 
have  been  formed  by  different  manufacturers  for  the 

1  It  should  be  explained  that  the  above  is  not  given  as  a  bona-fidt  statement  of 
facts  concerning  this  especial  trust,  but  as  a  vivid  description  of  the  organization 
and  plans  of  a  typical  trust,  from  the  standpoint  of  its  owners  and  managers. 

Probably,  too,  few  or  no  existing  trusts  have  tried  to  benefit  themselves  in  so 
many  different  ways  as  we  have  supposed  this  imaginary  trust  to  have  done.  But 
to  shorten  our  investigation,  the  author  has  purposely  extended  the  scope  of  this 
trust's  action,  to  bring  out  clearly  the  variety  and  importance  of  the  methods  by 
which  a  trust  reaps  profits,  aside  from  any  advance  in  the  price  of  its  product. 


TRUSTS  AND  MONOPOLIES.  1 5 

purpose  of  controlling  production  and  prices.  One 
thing  is  clearly  indicated  in  the  above,  and  will  certainly 
be  conceded  :  That  the  men  who  have  formed  these 
trusts  are  animated  by  the  same  motives  as  those  that 
govern  humanity  in  general.  They  have,  in  some  cases 
at  least,  known  what  it  was  to  be  crowded  close  to  the 
wall  by  severe  competition.  They  all  at  once  saw  a  way 
opening  by  which  they  could  be  freed  from  the  worries 
and  losses  which  had  been  making  their  business  one  of 
small  and  uncertain  profits,  and  would  be  set  squarely 
on  their  feet  with  a  sure  prospect  for  large  and  steady 
gains.  It  is  using  a  common  expression  to  say  that  they 
would  have  been  more  than  human  if  they  had  refused 
to  improve  this  opportunity.  Certainly,  then,  in  exam- 
ining further  the  trusts,  we  shall  do  so  with  no  feeling  of 
personal  prejudice  toward  the  men  who  originated  them 
and  carry  them  on. 

As  we  have  given  a  hearing  to  the  case  from  the  trust- 
makers'  standpoint,  it  is  only  fair  that  we  should  hear  at 
equal  length  from  the  public  who  oppose  the  trusts  ;  but 
to  abbreviate  the  investigation,  let  us  suppose  that  we 
are  already  familiar  with  the  various  charges  which  are 
brought  against  the  trust  monopolies,  and  let  us  proceed 
at  once  to  consider  the  actual  effect  of  the  trusts  upon 
the  public. 

Since  we  have  heard  so  much  in  defence  of  the  linseed 
oil  trust,  it  will  be  well  for  us  to  inquire  concerning  the 
results,  in  which  the  public  is  interested,  which  have  fol- 
lowed its  organization.  During  the  year  1887  (the  trust 
was  formed  in  January  of  that  year)  the  price  per  gallon 
of  linseed  oil  rose  from  thirty-eight  cents  to  fifty-two 
cents  ;  and  this  price  was  kept  up  or  exceeded  during 
1888.  That  is  to  say,  every  purchaser  of  linseed  oil,  or 


l6  MONOPOLIES  AND  THE  PEOPLE. 

every  one  who  had  occasion  to  have  painting  done,  pays 
to  the  members  of  this  trust,  for  every  gallon  of  oil  that 
he  uses,  about  fourteen  cents  over  and  above  the  sum  which 
he  would  pay  if  competition  were  allowed  to  do  its  usual 
work  in  keeping  down  prices. 

What  profits  are  the  members  of  this  trust  making  ? 
Let  us  suppose  that  they  were  just  able,  at  the  old  price 
of  thirty-eight  cents  per  gallon,  to  pay  all  their  running 
expenses  and  four  per  cent,  on  the  capital  invested, 
making  nothing  for  profits  beyond  a  fair  salary  to  the 
managers  of  the  business.  Then  the  gain  of  fifteen 
cents  a  gallon  in  the  selling  price  is  dear  profit  to  them. 
Now  add  to  this  the  fact,  which  was  plainly  brought  out 
in  the  foregoing  supposed  statement  by  a  member  of  the 
trust,  that  it  is  possible  by  means  of  the  trust  to  greatly 
reduce  expenses  in  many  directions  as  well  as  to  increase 
receipts,  and  we  begin  to  form  some  conception  of  the 
profits  which  this  trust  is  harvesting.  If  we  wish  to  put 
the  statement  in  figures,  suppose  we  take  the  annual 
consumption  of  linseed  oil  in  the  country  at  thirty  million 
gallons.  Then  the  profits  of  the  trust  from  the  increased 
prices  alone  will  amount  to  four  and  one  half  million 
dollars  per  annum. 

There  is  another  way  in  which  trusts  directly  affect 
the  public,  which  has  received  very  much  less  attention 
than  it  deserves.  Besides  the  people  who  use  the  linseed 
oil  and  pay  the  trust  an  extra  fourteen  cents  a  gallon  for 
the  privilege,  there  are  a  great  number  of  people  who 
would  have  used  oil  if  the  price  had  not  advanced,  but 
who  cannot  afford  to  do  so  at  the  advanced  price.  It  is 
a  well-known  fact  that  every  increase  in  the  price  of 
any  article  decreases  the  demand,  and  the  advance  in 
the  price  of  linseed  oil  has  undoubtedly  had  a  great 


TRUSTS  AND  MONOPOLIES.  I? 

effect  in  decreasing  the  consumption  of  oil.  So  while  it 
is  undoubtedly  true  that  at  the  trust's  prices  there  are 
more  linseed-oil  mills  in  the  country  than  are  needed  to 
supply  its  wants,  yet  if  the  prices  were  lowered  to  the 
point  which  free  competition  would  fix,  there  would 
probably  be  demand  enough  to  keep  all  the  mills  run- 
ning. To  the  trust,  then,  must  be  ascribed  the  final 
responsibility  for  the  stoppage  of  the  mills  and  the  loss 
of  employment  by  the  workmen.  Nor  does  the  effect 
upon  the  labor  market  stop  there.  From  the  fact  that 
less  people  can  afford  to  paint  their  houses,  because  of 
the  higher  price  of  the  oil,  it  is  certain  that  there  will  be 
less  employment  for  painters  ;  and  as  less  paint  is  used, 
all  those  interested  in  and  employed  in  the  paint  trade 
are  sufferers.  It  is  to  be  remembered  that  we  are  speak- 
ing of  the  linseed  oil  trust  only  to  make  the  case  more 
vivid.  The  principle  is  general  and  applies  equally  well 
to  other  trusts,  as  for  instance  to  the  loss  of  employment 
by  thousands  of  men  working  in  refineries  controlled  by 
the  sugar  trust,  in  the  fall  of  1888.  Still  another  effect 
of  this  trust's  action  is  to  be  especially  noted  :  the  fact 
that  the  diminished  production  of  oil  lessens  the  demand 
for  seed  ;  and  also  that  in  the  purchase  of  seed,  as  well 
as  in  the  sale  of  oil,  the  trust  has  killed  competition. 
The  trust  may,  if  it  chooses,  fix  uniform  prices  for  the 
seed  which  it  purchases  ;  and  the  farmer  can  take  the 
prices  they  offer  or  keep  his  seed.  Fortunately  the 
farmer  can  raise  other  products  instead  of  flax-seed,  and 
will  do  so  if  the  price  is  lowered  by  any  large  amount. 

One  other  possible  mode  of  profit  for  the  trusts,  which, 
however,  they  are  hardly  likely  to  engage  in — from  their 
fear  of  public  opinion,  if  for  no  other  reason — lies  in  the 
power  which  they  possess  over  the  labor  market.  It 


1 8  MONOPOLIES  AND  THE  PEOPLE. 

will  probably  be  conceded  at  once  that  the  rate  of  wages 
in  any  occupation  depends,  among  other  things,  upon 
the  competition  of  the  various  workmen  who  seek  em- 
ployment in  that  occupation,  and  also  upon  the  compe- 
tition among  those  who  wish  to  hire  men  to  work  at  that 
occupation.  It  is  plain  that  when  the  competition 
among  employers  to  secure  men  is  active,  wages  will 
rise  ;  and  when  this  competition  falls  off,  wages  will  fall. 
Now  the  trust  is  more  than  a  combination  for  selling 
purposes  only.  It  is  a  combination  of  all  the  properties 
concerned  under  practically  a  single  ownership.  Clearly, 
then,  as  the  various  mills  belonging  to  a  single  owner 
will  not  compete  with  each  other  in  the  employment  of 
labor,  the  mills  belonging  to  a  trust  will  be  no  more 
likely  to  do  so.  Thus  if  it  were  not  for  the  fact  that  the 
workmen  are  able  to  take  up  some  other  employment  if 
their  wages  are  too  low,  they  would  be  absolutely  obliged 
to  take  what  wages,  great  or  small,  the  trust  chose  to 
give,  and  would  be  as  dependent  for  their  food  and 
clothing  upon  the  trust  as  was  the  slave  upon  his 
master. 

The  question  is  often  asked  why  trusts  have  not  been 
formed  before,  and  what  the  causes  are  which  have 
started  them  up  so  rapidly  in  such  varied  lines  of  in- 
dustry. There  is  certainly  room  for  much  honest  dif- 
ference of  opinion  in  reference  to  these  causes  ;  but  one 
cause  concerning  whose  influence  there  can  be  no  dis- 
pute is  the  culmination  of  the  change  from  the  ancient 
system  of  manufacturing  to  the  modern.  Let  us  briefly 
trace  the  manner  in  which  this  branch  of  civilization  has 
grown  :  In  the  most  primitive  state  of  existence,  each 
man  procures  and  prepares  for  himself  the  few  things 
which  he  requires.  With  the  first  increase  in  intelligence 


TKUSTS  AND  MONOPOLIES.  19 

those  of  most  skill  in  making  weapons  and  preparing 
skins  make  more  than  they  require  for  themselves,  which 
they  exchange  with  others  for  the  products  of  the  chase. 
The  next  step  is  to  teach  to  others  the  special  skill  re- 
quired, and  to  employ  them  to  aid  the  chief  workman. 
Conditions  analogous  to  these  existed  down  to  the  end  of 
the  last  century.  The  great  bulk  of  all  manufacturing 
was  done  in  small  shops,  each  employing  only  a  few 
workmen  ;  and  the  manufacturer  or  master  workman 
labored  at  the  side  of  his  journeymen  and  apprentices. 
The  products  of  these  little  workshops  were  sold  in  the 
country  immediately  adjacent.  Of  course  the  number  of 
these  scattered  shops  was  so  great  that  the  possibility  of 
uniting  all  the  manufacturers  in  any  one  trade  into  a 
single  organization  to  prevent  competition  among  them, 
was  beyond  the  thoughts  of  the  most  visionary. 

The  present  century  has  seen  three  great  economic 
wonders  accomplished  :  the  invention  of  labor-saving 
machinery,  greatly  multiplying  the  efficiency  of  labor  in 
every  art  and  trade  ;  the  application  of  steam  power  to 
the  propulsion  of  that  machinery  ;  and  the  extension 
over  all  civilized  lands  of  a  network  of  railway  lines, 
furnishing  a  rapid,  safe,  and  miraculously  cheap  means 
of  transportation  to  every  part  of  the  civilized  world.  In 
order  to  realize  the  greatest  benefit  from  these  devices, 
it  has  become  necessary  to  concentrate  our  manufactur- 
ing operations  in  enormous  factories ;  to  collect  under 
one  roof  a  thousand  workmen,  increase  their  efficiency 
tenfold  by  the  use  of  modern  machinery,  and  distribute 
the  products  of  their  labor  to  the  markets  of  the  civilized 
world.  The  agency  which  has  acted  to  bring  about  this 
result  is  competition.  The  large  workshops  were  able 
to  make  goods  so  much  cheaper  than  the  small  work- 


20  MONOPOLIES  AND  THE  PEOPLE. 

shops  that  the  latter  disappeared.  Then  one  by  one  the 
large  workshops  were  built  up  into  factories,  or  were 
shut  up  because  the  factories  could  make  goods  at  less 
cost.  So  the  growth  has  gone  on,  and  each  advance  in 
carrying  on  production  on  a  larger  scale  has  resulted  in 
lessening  the  cost  of  the  finished  goods.  Competition, 
too,  which  at  first  was  merely  an  unseen  force  among  the 
scattered  workshops,  is  now  a  fierce  rivalry  ;  each  great 
firm  strives  for  the  lion's  share  of  the  market.  Under 
these  conditions  it  is  quite  natural  that  attempts  should 
be  made  to  check  the  reduction  of  profits  by  some  form 
of  agreement  to  limit  competition.  Many  plans  have 
been  tried  which  attempted  to  effect  this  by  mere  agree- 
ments and  contracts,  methods  which  left  each  property 
to  the  control  of  its  special  owners  ;  but  none  have  been 
permanently  successful.  By  the  trust  plan  of  combina- 
tion, the  properties  are  practically  consolidated  ;  and  the 
failure  of  the  combination  through  withdrawal  of  its 
members  is  avoided.  It  offers  to  manufacturers,  close 
crowded  by  competition,  a  means  of  swelling  their  prof- 
its and  ensuring  against  loss  ;  and  encouraged  by  the 
phenomenal  success  of  the  Standard  Oil  combination, 
they  have  not  been  slow  to  accept  it. 

The  point  to  which  we  need  to  pay  especial  attention, 
in  the  foregoing  consideration  of  the  causes  which  have 
produced  trusts,  is  the  fact  that  the  cost  of  production  is 
continually  being  cheapened  as  it  is  carried  on  on  a  larger 
and  larger  scale.  And  because  the  cheaper  mode  of  pro- 
duction must  always  displace  the  mode  which  is  more  ex- 
pensive :  as  Prof.  Richard  Ely  expresses  it,  "  Production 
on  the  largest  possible  scale  will  be  the  only  practical  mode 
of  production  in  the  near  future."  We  need  not  stop  to 
prove  the  statement  that  the  cost  of  production  by  the 


TKUSTS  AND  MONOPOLIES.  21 

modern  factory  system  fs  a  small  fraction  of  that  by  the 
old  workshop  system.  The  fact  that  the  former  has 
beaten  the  latter  in  the  race  of  competition  would  prove 
it,  if  it  were  not  evident  to  the  most  careless  observer. 
But  it  is  also  a  fact  that  the  trust,  apart  from  its  character 
as  a  monopoly,  is  actually  a  means  of  cheapening  pro- 
duction over  the  system  by  independent  factories,  for  it 
carries  it  on  on  a  larger  scale  than  it  has  ever  before  been 
conducted.  Our  review  of  the  trust  from  the  trust  makers' 
standpoint  showed  this  most  forcibly ;  and  we  shall  see 
more  of  it  as  we  study  further  the  methods  by  which  the 
monopoly  gains  an  advantage  over  the  independent  pro- 
ducer in  dispensing  with  what  we  may  call  the  waste  of 
competition.  In  the  argument  presented  by  the  Standard 
Oil  Trust  before  the  House  Committee  on  Manufactures 
in  the  summer  of  1888,  occurs  the  following  statement 
of  the  work  which  that  monopoly  has  done  in  cheapen- 
ing production  : 

' '  The  Standard  Oil  Trust  offers  to  prove  by  various  witnesses,  in- 
cluding Messrs.  Flagler  and  Rockefeller,  that  the  disastrous  condition 
of  the  refining  business  and  the  numerous  failures  of  refiners  prior  to 
1875  arose  from  imperfect  methods  of  refining,  want  of  co-operation 
among  refiners,  the  prevalence  of  speculative  methods  in  the  pur- 
chase and  sale  of  both  crude  and  refined  petroleum,  sudden  and  great 
reductions  in  prices  of  crude,  and  excessive  rates  of  freight  ;  that 
these  disasters  led  to  co-operation  and  association  among  the  refiners, 
and  that  such  association  and  co-operation,  resulting  eventually  in  the 
Standard  Oil  Trust,  has  enabled  the  refiners  so  co-operating  to  re- 
duce the  price  of  petroleum  products  and  thus  benefit  the  public  to  a 
very  marked  degree  and  that  this  has  been  accomplished  : 

"  I.  By  cheapening  transportation,  both  local  and  to  the  seaboard, 
through  perfecting  and  extending  the  pipe-line  system,  by  construct- 
ing and  supplying  cars  with  which  oil  can  be  shipped  in  bulk  at  less 
cost  than  in  packages,  and  the  cost  of  packages  also  be  saved  ;  by 
building  tanks  for  the  storage  of  oil  in  bulk  ;  by  purchasing  and  per- 


92  MONOPOLIES  AND  THE  PEOPLE. 

fecting  terminal  facilities  for  receiving,  handling,  and  reshipping  oils ; 
by  purchasing  or  building  steam  tugs  and  lighters  for  seaboard  or 
river  service,  and  by  building  wharves,  docks,  and  warehouses  for 
home  and  foreign  shipments. 

"  2.  That  by  uniting  the  knowledge,  experience,  and  skill,  and  by 
building  manufactories  on  a  more  perfect  and  extensive  scale,  with 
approved  machinery  and  appliances,  they  have  been  enabled  to  and 
do  manufacture  a  better  quality  of  illuminating  oil  at  less  cost,  the 
actual  cost  of  manufacturing  having  been  thereby  reduced  about  66 
per  cent. 

' '  3.  That  by  the  same  methods,  the  cost  of  manufacture  in  barrels, 
tin  cans,  and  wooden  cases  has  been  reduced  from  50  to  60  per  cent. 

"  4.  That  as  a  result  of  these  savings  in  cost,  the  price  of  refined 
oils  has  been  reduced  since  co-operation  began,  about  9  cents  per  gal- 
lon, after  making  allowance  for  reduction  in  the  price  of  crude  oil, 
amounting  to  a  saving  to  the  public  of  about  $100,000,000  per 
annum." 

Certainly  it  would  seem  that  this  is  a  strong  defence  of 
the  trust's  character  as  a  public  benefactor  ;  but  it  is 
well  to  note  that  while  it  has  been  making  these  expen- 
ditures and  reducing  the  price  of  oil  to  the  consumer,  it 
has  also  been  making  some  money  for  itself.  The  profits 
of  this  trust  in  1887,  according  to  the  report  of  the  com- 
mittee appointed  to  investigate  the  subject  of  trusts  by 
the  New  York  Legislature,  were  $20,000,000.  The  nom- 
inal capital  of  the  trust  is  but  $90,000,000,  a  large  portion 
of  which  is  confessedly  water.  In  answer  to  the  state- 
ment that  the  price  of  oil  has  been  reduced  steadily  by 
the  operations  of  the  trust,  it  is  charged  that  no  thanks 
is  due  to  the  trust  for  this  benefit.  The  trust  has  always 
wished  to  put  up  the  price,  but  the  continual  increase  in 
the  production  of  the  oil  fields  has  obliged  the  trust  to 
make  low  prices  in  order  to  dispose  of  its  stock.  There 
are  also  about  one  hundred  independent  refineries  com- 
peting with  the  trust,  and  their  competition  may  have  had 


TRUSTS  AND  MONOPOLIES.  2$ 

some  influence  in  keeping  prices  down.  It  is  undoubt- 
edly true  that  the  economy  in  the  storage,  transportation, 
and  distribution  of  oil  by  the  systematic  methods  of  the 
Standard  Oil  Trust  has  made  it  possible  to  deliver  oil 
to  the  consumer  at  a  small  fraction  of  its  cost  a  decade 
ago.  But  it  is  also  true  that  a  good  part  of  the  reduc- 
tion in  the  price  of  oil  is  due  to  the  abundant  production 
of  the  petroleum  wells,  which  have  furnished  us  so  lavish 
a  supply.  The  principal  charges  against  this  trust,  made 
by  those  who  were  conversant  with  its  operations,  have 
never  been  that  it  was  particularly  oppressive  to  con- 
sumers of  oil  ;  but  that,  in  the  attempt  to  crush  out  its 
competitors,  it  has  not  hesitated  to  use,  in  ways  fair  and 
foul,  its  enormous  strength  and  influence  to  ruin  those 
who  dared  to  compete  with  it. 

In  a  later  chapter  we  shall  be  able  to  study  these  more 
intricate  questions  regarding  trusts  with  a  better  under- 
standing of  our  problem.  Let  us  pay  some  attention  now 
to  the  growth  of  the  trusts  and  of  combinations  in  general 
for  the  purpose  of  limiting  competition  among  manufac- 
turers, which  has  taken  place  within  the  past  few  years. 

According  to  the  little  book  entitled  "  Trusts,"  by  Mr. 
Wm.  W.  Cook,  the  production  of  the  following  articles 
was,  in  February,  1888,  more  or  less  completely  in  the 
hands  of  trusts  :  petroleum,  cotton-seed  oil  and  cake, 
sugar,  oatmeal,  pearl  barley,  coal,  straw-board,  castor  oil, 
linseed  oil,  lard,  school  slates,  oil  cloth,  gas,  whiskey, 
rubber,  steel,  steel  rails,  steel  and  iron  beams,  nails, 
wrought-iron  pipe,  iron  nuts,  stoves,  lead,  copper,  envel- 
opes, paper  bags,  paving  pitch,  cordage,  coke,  reaping 
and  binding  and  mowing  machines,  threshing  machines, 
ploughs,  and  glass — a  long  and  somewhat  jumbled  list, 
to  which,  however,  at  the  present  time,  there  should 


24  MONOPOLIES  AND  THE  PEOPLE. 

probably  be  added  :  white  lead,  jute  bagging,  lumber, 
shingles,  friction  matches,  beef,  felt,  lead  pencils,  car- 
tridges and  cartridge-shells,  watches  and  watch  cases, 
clothes-wringers,  carpets,  coffins  and  undertakers'  sup- 
plies, dental  tools,  lager  beer,  wall  paper,  sandstone, 
marble,  milk,  salt,  patent  leather,  flour,  and  bread.  It 
should  be  said  that,  as  regards  most  of  these  combina- 
tions, the  public  is  ignorant  beyond  its  knowledge  that 
some  form  of  combination  for  the  purpose  of  restricting 
competition  has  been  formed.  For  the  purpose  of  our 
present  investigation  it  makes  little  difference  just  what 
this  combination  may  be. 

The  salient  facts  for  us  to  note  are,  that  among  the 
manufacturers  of  this  country  there  has  arisen  a  wide- 
spread movement  to  partially  or  wholly  avoid  competition 
in  the  production  and  sale  of  their  goods  ;  that  in  a  very 
great  number  of  manufacturing  industries  these  combina- 
tions have  progressed  so  far  that  their  managers  have 
been  able  to  advance  prices  and  check  production  ;  that 
some  of  these  combinations  have  taken  the  form  of  trusts, 
and  by  this  means  have  every  prospect  of  maintaining 
their  stability  and  reaping  their  enormous  profits  with 
the  same  permanency  and  safety  as  has  their  predecessor, 
the  Standard  Oil  Trust  ;  and,  finally,  that  with  this  pros- 
pect before  them,  our  manufacturers,  as  a  class,  would 
lose  their  reputation  as  shrewd  business  men  if  they  did 
not  follow  out  the  path  marked  out  for  them,  and  combine 
every  manufacturing  industry  in  which  combination  is 
possible  upon  the  plan  of  the  trust. 

In  conclusion,  it  may  be  well  to  examine  the  statement 
attributed  to  Mr.  Andrew  Carnegie,  that,  "  there  is  no 
possibility  of  maintaining  a  trust.  If  successful  for  a 
time,  and  undue  profits  accrue,  competition  is  courted 
which  must  be  bought  out  ;  and  this  leads  to  fresh  com- 


TKUSTS  AND  MONOPOLIES.  2$ 

petition,  and  so  on  until  the  bubble  bursts.  I  have  never 
known  an  attempt  to  defeat  the  law  of  competition  to  be 
permanently  successful.  The  public  may  regard  trusts 
or  combinations  with  serene  confidence." 

Surely  if  this  statement  is  true,  we  have  little  need  for 
further  examination  of  this  subject.  .  We  have  now 
knowledge  enough  of  our  subject  to  enable  us  to  deter- 
mine its  truth  or  falsity.  We  have  found  in  the  actual 
trusts  that  we  have  examined  none  which  have  shown 
signs  of  succumbing  to  outside  competition.  More  than 
this,  however,  we  have  seen  that  it  is  possible  for  a  trust 
to  carry  on  business  and  deliver  goods  to  the  consumer 
at  much  less  cost  than  an  independent  manufacturer  can. 
And  as  surely  as  this  law  holds  that  production  on  the 
largest  scale  is  the  cheapest  production,  so  surely  will  the 
trust  triumph  over  the  independent  manufacturer  wher- 
ever they  come  into  competition.  If  the  trust  were 
always  content  when  its  competitors  were  disposed  of,  to 
make  only  the  profits  which  it  could  secure  by  selling  at 
such  prices  as  the  independent  manufacturers  could 
afford,  there  would  be  less  outcry  against  it.  But  with 
the  consumers  wholly  dependent  upon  it  for  supplies,  the 
prices  are  in  the  trust's  hands  ;  and  the  tendency  is  to 
reap  not  only  the  profits  due  to  its  lessened  cost  of 
production,  but  also  all  it  can  secure  by  raising  the 
selling  price  without  arousing  too  much  the  enmity  of  the 
public. 

Clearly  the  trust  is  at  once  a  benefit  and  a  curse.  Can 
we  by  any  means  secure  the  benefit  which  it  gives  of 
reduction  in  cost  without  placing  ourselves  at  the  mercy 
of  a  monopoly  ?  This  is  the  question  which  must  occur 
to  every  thoughtful  man.  Before  we  can  answer  it,  how- 
ever, we  must  examine  the  effects  of  competition  and 
monopoly  in  other  industries. 


m. 

MONOPOLIES   OF   MINERAL  WEALTH. 

IT  is  a.  well  known  historical  fact  that  the  extraction  of 
metals  and  minerals  from  the  earth  has  been  more  sub- 
ject to  monopoly  than  almost  any  other  business.  It 
was,  and  in  a  large  part  of  the  civilized  world  still  is, 
esteemed  a  prerogative  of  the  sovereign.  Agricultural 
products  have  always  been  gathered  from  a  wide  area  ; 
manufactures  were  formerly  the  product  of  mean  and 
scattered  workshops  ;  but  in  the  working  of  a  rich  mine, 
there  was  a  constant  income  more  princely  than  was  to 
be  obtained  from  any  other  single  source.  Again,  with 
all  due  respect  to  the  traditions  of  former  generations,  it 
seems  to  have  been  thought  that  any  thing  to  which  no 
one  else  had  a  valid  title  belonged  to  the  crown  ;  and  as 
no  one  was  able  to  assert  any  stronger  claim  to  the 
ownership  of  mineral  wealth  than  that  they  had  stumbled 
upon  it,  it  was  natural  for  the  sovereign  to  claim  it  as 
his.  We  see  thus  the  recognition  at  an  early  date  of  the 
inherent  difference  between  natural  wealth  and  that 
created  by  labor. 

But  coming  down  to  the  present  time,  it  is  evident  that 
the  business  of  extracting  some  of  the  rarer  metals  from 
the  earth  is  peculiarly  liable  to  become  a  monopoly.  It  is 
one  of  the  new  laws  of  trade,  whose  force  and  importance 
we  are  just  finding  out,  that  the  ease  of  restricting  com- 

26 


MONOPOLIES  OF  MINERAL   WEALTH.  2/ 

petition  varies  with  the  number  of  competing  units  which 
must  be  combined.  Our  most  valuable  metal,  iron,  is 
so  widely  distributed  that  any  attempt  to  control  the 
whole  available  supply  could  not  long  be  successful.  But 
it  is  one  of  the  peculiarities  of  modern  industry  that  by 
its  specialization  it  furnishes  constant  opportunities  for 
the  establishment  of  new  forms  of  monopoly,  whose 
power  is  not  generally  understood.  In  the  manufacture 
of  Bessemer  steel,  which  has  now  largely  displaced 
wrought  iron  in  the  arts,  it  is  necessary  to  use  an  iron 
ore  of  peculiar  chemical  composition.  This  ore  is  found 
most  abundantly  and  of  best  quality  in  the  mines  of  the 
Vermilion  range,  lying  about  one  hundred  miles  north 
of  Duluth,  Minn.,  and  in  the  mines  of  the  Marquette 
Gogebic,  and  Menominee  regions  in  the  north  Michigan 
peninsula.  According  to  good  authorities,  a  combina- 
tion more  or  less  effective  has  been  formed  among  the 
owners  of  all  these  mines  ;  and  the  highest  price  is 
charged  for  the  ore  which  can  be  obtained  without 
driving  the  customer  to  more  distant  markets  for  his 
supply.  Among  the  mines  of  this  district,  competition, 
if  not  entirely  stopped,  is  greatly  checked,  and  is  likely 
soon  to  be  entirely  a  thing  of  the  past.  It  is  an  interest- 
ing fact  that  among  the  members  of  the  syndicate  which 
owns  the  principal  mines  in  the  Vermilion  regions  are 
some  of  the  trustees  of  the  Standard  Oil  Trust.  It  is 
stated  that  some  of  these  mines  have  paid  90  per  cent, 
per  annum  on  their  capital  stock,  which,  it  is  to  be  noted, 
represents  a  much  greater  sum  than  the  amount  in- 
vested in  the  plant  of  the  mine. 

It  is  thus  apparent  that  the  mining  of  the  raw  ore 
from  which  iron  is  made,  abundant  and  scattered  though 
it  is,  is  not  free  from  monopoly.  The  combinations  to 


28 


MONOPOLIES  AND  THE  PEOPLE. 


restrict  competition  among  the  makers  of  cast  iron  and 
of  steel  belong  properly  under  the  head  of  monopolies 
in  manufactures.  We  need  only  refer  here  to  the  fact 
that  they  are  supposed  to  exist  and  have  more  or  less  con- 
trol of  the  market. 

Fortunately  for  the  stability  of  our  system  of  currency 
and  of  finance,  the  precious  metals,  through  the  small 
ratio  which  their  current  production  bears  to  the  world's 
stock,  and  the  fact  that  this  stock  is  scattered  among  an 
enormous  number  of  holders,  are  safe  from  any  attempts 
to  establish  a  monopoly  to  control  their  price  through 
the  control  of  their  production.  Other  metals,  however, 
which  are  like  silver  and  gold  in  being  found  in  worka- 
ble deposits  at  but  a  few  points  on  the  globe  but  are 
there  found  in  abundance,  are  peculiarly  adapted  to 
facilitate  the  schemes  of  monopolists.  Of  lead,  copper, 
zinc,  and  tin,  we  require  a  steady  supply  for  use  in  the 
various  arts  ;  and  the  statement  has  been  made  that  the 
supply  of  each  one  of  these  is  in  the  hands  of  a  trust. 
To  see  the  effect  which  these  combinations  have  had  on 
prices,  let  us  examine  the  prices  which  have  prevailed 
for  two  years  past  on  these  four  articles,  as  shown  in 
the  following  table  : 

Table  of  wholesale  prices  (cents  per  Ib.)  in  New  York 
City  of  copper,  lead,  tin,  and  zinc  during  1886, 1887,  and 
1888: 


1885 

1886 

1886 

1886 

1887 

1887 

1887 

Dec.  31 

Apr.  3 

July  3 

Oct.  7 

Jan.  5 

Apr.  6 

July  6 

Copper.  . 

11.50 

11.45 

IO.OO 

11.00 

12.25 

II.  OO 

10.50 

Lead.  .  .  . 

4.60 

4.90 

4.90 

4-35 

4-75 

4-75 

4.92 

Tin  

24.50 

24.50 

25.00 

Zinc  

5-35 

5-50 

5.60 

5.60 

6.42 

6.50 

7.00 

MONOPOLIES  OF  MINERAL   WEALTH. 


29 


1887 

1887 

1888 

1888 

1888 

1889 

1889 

Oct.  6 

Dec.  29 

Mar.  29 

July  3 

Oct.  4 

Jan.  3 

Apr.  29 

Copper.  . 

II.  OO 

17-75 

17-50 

17-25 

18.50 

I7-50 

16.50 

Lead.  ...   4.45 

5.00 

5-50 

4-25 

5-75 

3-85 

4-25 

Tin  23.30 

37.00 

39-50 

22.00 

26.00 

22.00 

23.00 

Zinc....   6.75 

6.00 

6.75 

6.50 

6-75 

5-50 

6.50 

Taking  the  evidence  of  this  table,  we  conclude  that  the 
combination  which  is  said  to  control  the  zinc  and  lead 
markets  is  probably  not  a  trust,  but  a  "  Producer's  syn- 
dicate "  or  corner.  The  prices  of  lead  show  no  such 
firm  tendency  to  advance  as  would  be  expected  if  the 
production  was  in  the  hands  of  a  single  combination. 

The  prices  of  zinc,  however,  show  a  decided  advance 
in  the  past  two  years  over  the  prices  for  the  three  years 
preceding,  the  average  price  for  1886  being  but  5.50, 
while  for  1887-8  it  is  6  58.  This  is  a  rise  of  no  small 
importance,  and  the  way  it  is  maintained  seems  to  give 
evidence  of-  restriction  of  competition  among  producers. 

But  the  striking  fact  in  the  above  table  is  the  evidence 
it  presents  of  the  work  which  has  been  done  by  that  most 
gigantic  and  daring  combination  for  the  suppression  of 
competition  ever  organized,  the  French  Copper  Syndi- 
cate or  La  Socie't^  Industrielle  Commerciale  des  Metaux. 
This  syndicate  of  French  capitalists  began  operations  in 
1887,  with  the  intention  of  "  cornering  "  the  tin  supply 
of  the  world.  The  rise  in  price  which  was  due  to  their 
operations  is  shown  in  the  above  table.  But  before 
completing  their  scheme  they  relinquished  it  for  a 
grander  enterprise,  which  would  embrace  the  copper 
production  of  the  world.  They  made  contracts  with  the 
copper-mining  companies  in  every  country  of  the  globe, 


30  MONOPOLIES  AND  THE  PEOPLE. 

by  which  they  agreed  to  purchase  all  the  copper  which 
should  be  produced  by  the  mines  for  three  years  to  come 
at  the  fixed  price  of  13  cents  per  pound,  and  a  bonus  of 
half  the  profit  which  the  syndicate  was  able  to  make 
from  its  sales  to  consumers.  In  effect  this  move  killed 
the  competition  in  the  copper  trade  of  the  world,  and 
placed  every  consumer  at  the  mercy  of  this  Paris  syndi- 
cate. The  advance  in  tin  was  of  short  duration,  and 
those  who  suffered  by  it  were  speculators  rather  than 
consumers  ;  but  the  advance  in  copper,  as  shown  by  our 
table,  is  still  firmly  maintained,  and  its  effect  on  the  in- 
dustries using  copper  has  been  seriously  felt  all  through 
1888.  In  October,  1888,  the  Soeie'ti  extended  its  con- 
tracts with  several  mining  companies  to  cover  a  period 
of  twelve  years,  and  advanced  its  price  to  the  producers 
to  13!  cents  per  pounds.  At  the  same  time,  to  avoid 
the  accumulation  of  stock,  which  the  diminished  con- 
sumption consequent  upon  the  increased  price  had 
caused,  and  which  it  had  been  generally  predicted  would 
finally  be  the  cause  of  the  Society's  downfall,  they  ar- 
ranged for  the  restriction  of  the  production  of  the  mines. 
If  the  Socie'te,  which  is  backed  by  the  heaviest  capital, 
and  managed  by  the  shrewdest  business  skill  of  France, 
does  what  it  intends  to  do,  and  its  tributary  producers 
are  faithful  to  their  contracts,  for  ten  years  to  come,  yes, 
for  all  years  to  come — for  it  is  not  likely  that  an  enter- 
prise of  such  golden  returns  will  ever  be  abandoned  if  it 
can  once  profitably  be  carried  out, — the  world  must  pay 
for  its  copper  whatever  these  monopolists  demand. 

Probably  the  argument  against  the  private  ownership 
and  control  of  the  wealth  which  nature  has  stored  up 
for  the  whole  world's  use  was  never  brought  home  to 
men's  minds  so  forcibly  as  it  has  been  by  the  acts  of 


MONOPOLIES  OF  MINERAL   WEALTH.  31 

these  French  speculators.  Copper  is  a  necessity  to 
the  industries  of  civilized  society  ;  and  the  mind  of 
every  unprejudiced  person  protests  against  the  injus- 
tice of  placing  in  the  hands  of  any  single  firm  or 
combination  the  power  to  exact  such  prices  as  they 
choose  for  the  great  staples  of  human  consumption. 
This  increase  of  price  of  about  7  cents  per  pound  is 
a  tax  which  affects,  directly  or  indirectly,  every  per- 
son in  the  civilized  world.  Let  us  inquire  what  be- 
comes of  this  tax.  Perhaps  2  cents  per  pound  will  go 
into  the  pockets  of  the  Frenchmen  who  have  engineered 
the  combination,  a  sum  which  will  give  them,  if  we  set 
the  annual  consumption  of  copper  at  400,000,000  pounds, 
a  comfortable  net  income  of  about  $8,000,000  per  an- 
num. The  lion's  share  of  the  profits  is  taken  by  the 
producers,  however  ;  who,  if  10  cents  is  the  price  at 
which  copper  would  sell  if  free  competition  were  in 
force,  are  receiving  under  the  present  contract  with  the 
Soctiti  about  5  cents  per  pound  as  a  reward  for  their  co- 
operation in  its  monopolistic  scheme.1 

1  Since  the  above  was  written  the  collapse  of  the  copper  syndicate 
has  taken  place.  The  causes  which  brought  this  about  were  the  fail- 
ure to  complete  the  contracts  for  restriction  of  production,  and  lack  of 
funds  to  meet  the  current  liabilities.  The  reason  for  both  these  must 
be  largely  ascribed  to  the  fact  that  it  had  come  to  be  generally  real- 
ized how  great  and  how  obnoxious  the  monopoly  was  ;  and  capitalists 
rightly  feared  that  government  interference  would  be  interposed  to 
check  the  monopoly's  operations.  If  the  syndicate  had  made  its  long- 
time contracts  at  the  start,  or  if  it  had  been  bold  and  shrewd  enough 
to  have  inveigled  speculators  on  the  bear  side  of  the  market  into  op- 
erating against  it,  M.  Secretan  and  his  associates  might  have  won  as 
many  millions  as  they  could  have  wished.  It  is  a  significant  fact  that 
the  downfall  of  the  syndicate  was  not  followed  by  the  ree'stablishment 
of  free  competition.  Instead  there  was  at  once  talk  of  another  syn- 
dicate being  formed  to  hold  the  copper  stored  up  by  the  Socit/l/,  and 


32  MONOPOLIES  AND  THE  PEOPLE. 

It  is  appropriate  here,  too,  to  make  reference  to  the 
enormous  profits  which  the  owners  of  the  copper  mines 
of  the  country  are  receiving,  apart  from  the  special  in- 
fluence of  this  great  syndicate.  The  richest  and  most 
valuable  copper  mines  in  the  world  lie  on  the  southern 
shore  of  Lake  Superior.  The  Calumet  and  Hecla  Com- 
pany, which  works  one  of  the  richest  deposits  of  native 
copper  ever  found,  has  a  capital  stock  of  $2,500,000,  on 
which  it  has  paid,  since  1870,  $30,000,000  in  dividends. 
The  reports  of  these  companies  to  their  stockholders 
show  that  the  present  cost  of  refined  copper  at  the  mines 
is  as  low  as  4  cents  per  pound,  and  its  cost,  delivered  in 
the  New  York  market,  is  only  5!  cents.  Probably  the 
officers  of  these  companies  are  right  in  their  belief  that 
in  no  other  mines  of  the  world  can  copper  be  produced 
so  cheaply.  But  the  question  that  comes  with  force  to 
every  thinking  man  is  :  If  the  wealth  of  the  ore  in  these 
mines  is  so  much  greater  than  that  in  any  other  that  it 
can  be  produced  at  so  much  less  cost,  does  there  not 
exist  here  a  natural  monopoly,  of  which  the  owners  of 
these  mines  are  getting  the  sole  benefit  ?  And,  again, 
by  what  right  does  the  chief  benefit  from  this  rich  de- 
posit accrue  to  the  few  men  who  own  the  mines,  rather 
than  to  the  many  men  in  all  parts  of  the  world  who  wish 
to  use  their  product  ? 

Great  and  important  as  is  the  copper  monopoly,  of  far 
greater  importance  to  us  than  any  and  all  the  combina- 
tions in  the  metal  industries  are  the  monopolies  which 

keep  the  price  up  as  long  as  possible.  On  this  side  of  the  water  the 
question  was  at  once  canvassed  whether  a  combination  could  be 
formed  among  the  different  American  companies  to  prevent  competi- 
tion and  support  the  price.  Evidently  the  failure  of  this  scheme  has 
not  discouraged  the  makers  of  monopolies. 


MONOPOLIES  OF  MINERAL   WEALTH.  33 

control  the  price  of  coal.  We  do  not  often  realize  how 
intimately  connected  is  our  nineteenth-century  civiliza- 
tion with  the  store  of  fuel  laid  up  for  us  in  distant  geo- 
logic ages.  And  in  this  country,  with  our  severe  cli- 
mate, coal  is  all-important  as  a  factor  of  domestic 
economy,  as  well  as  a  necessity  to  manufacturing  and 
metallurgical  industries.  The  total  cost  to  the  consum- 
ers of  the  coal  used  in  the  United  States  every  year 
(about  120,000,000  tons),  calling  the  average  retail  price 
$4.00  per  ton,  is  nearly  $500,000,000,  or  over  $8.00  per 
annum  for  every  man,  woman,  and  child  in  the  country. 
Surely,  then,  the  statement  which  we  make  at  the  outset, 
that  the  coal  trade  of  the  United  States  is  in  the  hands 
of  monopolists  ;  and  that  competition,  where  not  killed, 
is  almost  impotent  to  keep  down  prices,  is  one  which 
merits  earnest  attention. 

The  United  States  possesses  coal  fields  of  enormous 
extent  and  richness.  The  mineral  is  widely  distributed, 
too,  productive  mines  being  now  in  operation  in  27  of 
the  States  and  Territories.  Anthracite  coal,  however, 
which  is  by  far  the  best  adapted  to  domestic  use,  only 
occurs  in  a  limited  area  in  the  State  of  Pennsylvania  ; 
but  here  the  deposit  is  of  phenomenal  richness.  The 
total  area  of  the  Pennsylvania  anthracite  field  is  about 
300,000  acres.  Of  this  area  nearly  200,000  acres  is 
owned  by  seven  railway  corporations.  These  companies, 
either  directly  or  through  subsidiary  companies  con- 
trolled in  the  same  interest,  carry  on  mining  operations, 
carry  the  coal  to  market,  and  sell  it.  The  following  fig- 
ures l  exhibit  the  receipts  of  each  of  these  companies 
from  sales  of  coal  from  their  mines  during  the  year  1887: 

1  Compiled  from  "  The  Coal  Trade,"  1888,  (H.  E.  Saward),  and 
"  Poor's  Manual  of  Railroads,"  and  partially  estimated. 


34 


MONOPOLIES  AND  THE  PEOPLE. 


COMPANY. 

TONS. 

RECEIPTS. 

Philadelphia  and  Reading  R.  R.  Co  

7  cee  2«!2 

$18,856  550 

Central  R.  R.  Co.  of  N.  J  

4  8<\2  8";Q 

12  132  146 

Lehigh  Valley  R.  R.  Co  

*,  784  .mo 

14  46l   I2S 

Del.,  Lackawanna,  and  Western  R.  R.  Co.  . 
Delaware  and  Hudson  Canal  Co  

6,220,793 

4.048.340 

19,044,803 

10  loo  118 

Pennsylvania  R.  R.  Co  . 

3  818  14-} 

8  820  718 

New  York,  Lake  Erie,  and  Western  R'y  Co. 

2,363,290 

6,846,342 

Total  

•?4  641  127 

$90  261  805 

Thus  these  seven  corporations  alone  produced  from 
their  own  mines,  carried  to  market,  and  sold,  over  34,- 
000,000  tons  of  coal  during  the  year,  for  which  they 
received  about  $90,000,000.  Of  the  magnitude  of  the 
operations  carried  on  by  these  great  corporations  we 
now  have  some  idea.  Let  us  next  inquire  to  what  ex- 
tent competition  is  allowed  to  act  between  them  to  keep 
down  prices. 

Many  years  ago  these  seven  companies  formed  the  fam- 
ous anthracite-coal  pool.  This  was  an  agreement  by  which 
all  the  companies  concerned  agreed  to  maintain  a  uni- 
form selling  price  for  coal  at  all  important  distributing 
points  where  two  or  more  of  the  companies  came  into 
competition.  Some  of  the  prices  which  were  fixed  by 
the  pool  were  extremely  arbitrary.  Cities  in  Pennsyl- 
vania within  an  hour's  ride  of  the  coal  fields  had  to  pay 
nearly  as  high  a  price  for  coal  as  those  500  miles  or 
more  distant.  Rates  of  transportation  on  coal  mined 
by  individual  operators  were  made  such  that  the  latter 
could  not  afford  to  sell  below  the  prices  fixed  by  the 
pool,  even  if  they  had  been  so  disposed.  At  the  pres- 
ent time  the  situation  has  been  modified  by  the  long 
and  short-haul  clause  of  the  Interstate  Commerce  law, 


MONOPOLIES  OF  MINERAL   WEALTH.  35 

by  which  the  railroad  is  obliged  to  make  its  transporta- 
tion rates  somewhat  proportionate  to  distance,  and  also 
by  the  passage  of  a  law  in  the  State  of  Pennsylvania, 
by  which  the  acts  of  the  anthracite-coal  pool  were  de- 
clared illegal  and  punishable.  Nominally,  therefore,  the 
pool  is  a  thing  of  the  past ;  but  the  practical  fact  is, 
that  by  secret  or  tacit  agreement  the  various  companies 
are  not  competing  with  each  other  any  more  now  than 
in  the  days  of  the  pool,  and  at  points  like  New  York  or 
Buffalo,  where  two  or  more  roads  meet,  the  same  prices 
are  quoted  by  each  different  company. 

Nor  are  the  charges  against  the  pool  comprehended  in 
its  autocratic  determination  of  the  price  of  coal.  To 
make  production  correspond  with  price,  it  was  necessary 
at  times  to  close  collieries  entirely,  throwing  the  miners 
out  of  employment.  The  individual  operators,  too, 
have  no  love  for  the  combination.  Their  profit  depends 
more  than  any  thing  else  on  the  rate  of  transportation, 
and  thus  whether  they  shall  make  or  lose  depends  on 
the  railroad  companies.  They  claim  that  the  railways 
base  their  rates  for  carrying  coal  upon  the  principle  of 
"  charging  what  the  traffic  will  bear."  This  is  a  matter, 
however,  which  we  can  better  discuss  in  the  next 
chapter. 

It  is  thus  evident  beyond  dispute  that  the  production 
of  anthracite  coal  in  this  country  is  an  industry  uncon- 
trolled by  competition.  To  sum  up  :  these  seven  great 
corporations  own  more  than  two  thirds  of  the  area  in 
which  workable  anthracite  coal  is  found  :  they  mine  and 
market  directly  the  great  bulk  of  the  total  production  ; 
the  individual  operators  are  dependent  on  the  railways 
for  getting  their  coal  to  a  market ;  and  the  price  at 
which  they  can  afford  to  sell  it  depends  on  the  railroad 


36  MONOPOLIES  AND  THE  PEOPLE. 

rates.  Finally,  consider  that  these  seven  companies  work 
in  harmony,  both  as  to  traffic  rates  and  prices  for  the 
sale  of  coal,  and  the  conclusion  is  irresistible  that  com- 
petition in  anthracite-coal  production  in  the  United 
States  is  practically  dead. 

Let  it  be  noted,  for  the  benefit  of  those  who  may  con- 
ceive that  the  above  statement  is  unfair  to  the  railway 
companies,  that  no  charge  is  here  made  that  the  prices 
fixed  by  the  companies  for  the  coal  are  at  the  present 
time  extortionate  or  unjust.  That  is  a  separate  matter  ; 
in  which,  doubtless,  there  would  be  plenty  to  affirm  on 
the  one  hand  that  the  prices  charged  were  no  more  than 
a  just  compensation,  while  their  opponents  would  de- 
clare that  the  prices  adopted  by  the  pool  favor  some 
points  to  the  prejudice  of  others,  and  that  the  state- 
ment that  they  were  on  the  whole  exorbitant  was  proven 
by  the  fact  that  the  railway  lines  in  the  coal  regions, 
where  honestly  managed,  have  paid  great  dividends  on 
the  actual  capital  invested. 

Compared  with  the  production  of  Pennsylvania  an- 
thracite, the  coal  production  of  any  other  single  sec- 
tion seems  small.  But  it  is  only  so  by  comparison, 
for  the  Western  coals,  while  inferior  in  quality,  are 
abundant  and  easily  mined,  and  must  remain  the  staple 
for  general  consumption  throughout  the  region  west  of 
the  Mississippi,  as  well  as  for  large  sections  further 
east. 

As  is  well  known,  the  people  of  the  Western  and 
Northwestern  plains  are  wholly  dependent  upon  the 
railroads  for  their  supplies  of  every  description,  except 
the  raw  products  of  the  soil.  The  railways  themselves 
are  great  consumers  of  coal,  and  have  bought  up  large 
tracts  of  coal  lands  and  opened  mines.  In  the  desire 


MONOPOLIES  OF  MINERAL  WEALTH.  37 

to  develop  traffic  and  ensure  a  supply  of  coal  to  the  set- 
tlers on  their  lines — we  will  even  say  of  cheap  coal, — the 
railway  companies  have  entered  the  coal  trade  them- 
selves, either  directly  or  through  subsidiary  companies. 
Thus  it  comes  about  that  hundreds  of  thousands  of 
people  of  the  West  and  Northwest  must  pay  for  coal, 
which  is  an  absolute  necessity  of  life  during  several 
months  of  the  year,  whatever  price  the  managers  of  a 
single  railway  corporation  may  demand.  Let  it  be  un- 
derstood that  no  charges  are  here  made  of  injustice 
or  extortion  on  the  part  of  the  railway  companies.  It 
is  only  wished  to  bring  out  the  fact  that  competition 
is  here  wholly  absent.  It  is  believed  that,  in  some 
cases  at  least,  an  honest  attempt  has  been  made  to  mine 
and  sell  the  coal  at  merely  a  fair  profit.  But  in  days  to 
come  it  will  not  be  so  directly  for  the  interest  of  the 
railways  to  deal  liberally  with  their  patrons  as  at  pres- 
ent. Other  men  of  less  breadth  and  principle  and  more 
ready  to  grasp  at  a  chance  for  enormous  profits  may 
control  the  company's  affairs  ;  and  if  that  happens,  the 
opportunity  to  take  advantage  of  the  absence  of  compe- 
tition and  raise  the  price  of  coal  will  be  utilized. 

A  brief  review  of  the  actual  status  of  the  coal  pro- 
duction of  the  West  and  South  will  help  us  to  a  clear 
appreciation  of  the  case.  The  Missouri  Pacific  Railway 
Company,  through  subsidiary  companies,  extracted  from 
its  mines  in  Missouri  and  the  Indian  Territory,  during 
1887,  1,618,605  tons  °f  coal.  Through  its  control  of 
transportation  rates,  private  operators  have  been  com- 
pelled to  sell  coal  at  the  company's  prices  in  the  market. 
The  company  has  recently  purchased  large  tracts  of  coal 
lands  in  Colorado,  on  which  it  is  opening  mines.  The 
Atchison,  Topeka,  and  Santa  Fe",  the  Chicago,  Burlington, 


38  MONOPOLIES  AND  THE  PEOPLE. 

and  Quincy,  the  Denver  and  New  Orleans,  the  Union  Pa- 
cific, and  the  Denver  and  Rio  Grande  Railway  com- 
panies are  also  heavily  interested  in  the  Colorado  coal 
mines.  The  last  company  has  long  held  a  bonanza  in 
the  monopoly  of  the  coal  mining  and  transportation 
for  the  Colorado  silver-mining  and  smelting  districts. 
Though  the  other  companies,  to  which  the  Rock  Island 
should  probably  be  added,  come  in  as  competitors,  there 
can  be  no  doubt  that  their  active  competition  will  be  of 
short  duration.  The  Wyoming  coal  fields  are  being  worked 
by  the  Union  Pacific  and  the  Chicago  and  Northwestern 
companies,  while  the  Chicago,  Burlington,  and  Quincy 
and  a  company  supposed  to  be  closely  connected  with  the 
Northern  Pacific  are  preparing  to  take  the  field  at  an 
early  date.  On  the  Pacific  coast  the  coal  trade  has  long 
been  a  monopoly  in  the  hands  of  the  Oregon  Railway 
and  Navigation  Company,  who  have  kept  the  prices  in 
San  Francisco  just  below  the  point  at  which  it  becomes 
profitable  to  import  Australian  coal.  Other  railways  are 
now  preparing  to  reach  the  coal  fields,  but  can  we  doubt 
that  the  competition  to  which  the  coal  consumers  are 
looking  with  eager  anticipation  will  prove  evanescent  ? 
Returning  to  the  East,  we  find  the  coal  mines  of  northern 
Illinois  all  held  by  a  single  company,  which  has  full 
control  of  the  traffic  ;  while  the  mines  of  southern  Illi- 
nois, on  which  the  St.  Louis  consumers  depend,  are 
united  as  the  Consolidated  Coal  Company.  This  latter 
corporation  has  "  wrecked  "  many  of  its  mines  for  the 
purpose  of  limiting  the  supply  and  raising  the  price  ; 
and  has  bought  many  mines  of  competing  companies  and 
closed  them  for  the  same  purpose.  The  Attorney-Gen- 
eral of  Illinois  has  been  requested  to  bring  suit  against 
this  "  trust  "  for  the  forfeiture  of  its  charter. 


MONOPOLIES  OF  MINERAL   WEALTH.  39 

In  the  Hocking  Valley  coal  fields  in  Ohio,  the  Colum- 
bus, Hocking  Valley  and  Toledo  Railway  Company  owns 
10,000  acres  of  coal  lands,  and  mined,  in  1887,  1,870,416 
tons  of  coal.  The  coal  in  western  Virginia  is  coming 
into  the  hands  of  the  Norfolk  and  Western  Railroad 
Company,  while  the  coal  of  Alabama,  of  which  so  much 
has  been  noised  abroad,  has  been  quietly  gathered  in  by 
the  Louisville  and  Nashville  corporation.  The  Tennes- 
see Coal  and  Iron  Company,  which  owns  76,000  acres 
of  coal  lands,  and  mined  1,145,000  tons  in  1882,  is 
owned  by  parties  largely  interested  in  the  East  Ten- 
nessee, Virginia  and  Georgia  Railroad  system.  West 
Virginia  has  probably  the  most  valuable  untouched  coal 
deposits  of  any  State  in  the  Union,  but  these  also  are 
rapidly  being  gathered  up  by  railway  corporations. 

To  sum  up,  in  the  words  of  one  of  the  best  informed 
authorities,  the  coal  business  of  the  country  is  at  the 
mercy  of  the  railroads. 

It  is  to  be  noted,  however,  that  this  is  simply  the 
result  of  natural  causes.  Railway  managers,  in  seeking 
to  develop  and  place  on  a  sound  basis  the  mineral  prop- 
erties which  could  furnish  a  heavy  and  profitable  traffic 
to  their  lines,  have  only  done  what  they  regarded  as 
their  duty  to  the  owners  of  their  roads.  And  that  this 
policy  has  effected  a  rapid  development  of  our  resources 
is  beyond  question. 

The  combinations  to  restrict  competition  among  bitu- 
minous coal  producers  have  been  of  a  very  different  sort 
from  those  in  force  among  the  anthracite  producers. 
The  soft-coal  fields  are  so  widely  scattered  that  it  has 
never  been  possible  to  combine  all  the  producers  so  as  to 
control  prices  by  a  single  authority.  Local  combinations, 
however,  controlling  all  the  fields  of  a  single  locality, 


40  MONOPOLIES  AND  THE  PEOPLE. 

have  long  been  an  important  feature  of  the  trade,  and 
have  been  able  to  control  prices  pretty  absolutely  within 
their  respective  localities.  The  fact  that  the  principal 
item  in  the  cost  of  coal  is  transportation,  enables  a  com- 
bination covering  all  the  producers  of  a  certain  field  to 
raise  prices  very  notably  before  competitors  can  afford 
to  ship  from  other  coal-producing  districts. 

It  would  seem  that  our  fuel  is  especially  liable  to  be 
subjected  to  monopoly,  for,  as  we  have  already  seen  in 
the  preceding  chapter,  the  control  over  the  petroleum 
trade  is  held  by  the  Standard  Oil  Trust.  How  much  of 
the  production  of  crude  petroleum  is  in  the  hands  of  the 
trust  it  is  hard  to  say.  This  much  is  certain,  that  there 
is  a  "  Petroleum  Producers'  Association,"  which  has  a 
compact  enough  organization  to  be  able  to  make  con- 
tracts with  the  Standard  Oil  Company  regarding  the 
limitation  of  production.  It  is  even  stated  that  the  Stand- 
ard Oil  Trust  itself  controls  to  a  considerable  extent  the 
oil-producing  territory  ;  but  this  is  hardly  probable. 

Our  newest  and  most  wonderful  fuel,  natural  gas,  has 
already  come  under  the  control  of  a  few  great  corpora- 
tions, who  own  the  wells  and  the  pipes  for  conveying 
and  distributing  it  to  the  consumers.  A  striking  in- 
stance of  the  arbitrary  nature  of  prices  when  under  a 
monopoly's  control  was  shown  at  Pittsburgh  a  few 
months  ago.  As  is  well  known,  upon  the  introduction 
of  natural  gas  to  that  city  a  great  number  of  the  man- 
ufactories, as  well  as  the  private  houses,  discarded 
coal,  and  at  considerable  expense  fitted  up  boilers,  fur- 
naces, etc.,  to  use  the  new  fuel.  After  the  use  of  the 
gas  had  become  general  and  its  value  had  come  to  be 
thoroughly  understood,  the  company  furnishing  the  sup- 
ply advanced  the  rates  100  per  cent.,  without  previous. 


MONOPOLIES  OF  MINERAL   WEALTH  41 

notice  ;  and  despite  the  remonstrance  of  indignant  con- 
sumers, the  advanced  rate  had  to  be  paid  or  the  use  of 
the  gas  discontinued,  the  latter  alternative  involving  the 
loss  of  the  money  invested  in  piping,  burners,  etc. 

Of  the  minor  products  of  mines  and  quarries,  marble, 
sandstone,  borax,  salt,  and  asphalt  are  all  known  to  be 
more  or  less  thoroughly  under  the  control  of  monopo- 
lies, which,  though  less  important  and  powerful,  show 
the  same  tendency  toward  the  destruction  of  compe- 
tition. 

Great  as  is  the  extent  to  which  the  monopoly  of  the 
mineral  wealth  of  the  world  has  gone,  we  can  scarcely 
doubt  that  if  the  movement  is  unchecked  it  will  go 
much  farther.  In  one  sense  the  only  absolute  neces- 
saries of  life  are  food  and  clothing.  But  to  the  civilization 
of  to-day  the  metals  and  minerals  are  no  less  indispen- 
sable ;  and  these  cannot  be  made  anywhere,  like  manu- 
factured goods  ;  or  grown  on  wide  areas,  like  the  prod- 
ucts of  the  soil.  We  are  absolutely  at  the  mercy  of  the 
men  who  own  our  deposits  of  coal  and  copper  and  lead, 
and  it  is  only  to  be  expected  that  they  will  take  greater 
advantage  of  their  legal  industrial  advantage.  The 
combinations  that  exist  will  be  made  stronger  and  more 
binding,  and  new  ones  will  be  formed.  The  French 
copper  "  corner  "  has  taught  men  that  under  the  broad 
protection  of  International  law  their  schemes  of  indus- 
trial conquest  may  embrace  the  world  ;  and  it  is  not  to 
be  doubted  that  the  temporary  "  corner  "  will  yet  result 
in  a  strong  permanent  combination  ;  and  that  the  prece- 
dent set  by  this  successful  monopoly  will  be  eagerly  fol- 
lowed by  those  who  wish  to  secure  like  profits  by  the 
control  of  some  other  form  of  mineral  wealth. 


IV. 


MONOPOLIES  OF   TRANSPORTATION  AND 
COMMUNICATION. 

WE  have  already  alluded  to  the  fact  that  the  concen- 
tration of  manufacturing  in  large  mills  at  great  commer- 
cial centres  has  been  made  possible  by  the  development 
of  railway  transportation,  and  that  the  rapid  settlement 
of  our  Western  prairies  is  due  to  the  same  agency  ;  but 
it  is  worth  while  to  note  more  fully  the  difference  be- 
tween ancient  and  modern  conditions  in  the  business  of 
transportation. 

In  the  first  place,  it  is  plain  that  no  more  than  a  cen- 
tury ago  the  world  had  comparatively  very  little  need 
for  railways.  Each  community  produced  from  its  farms 
and  shops  most  of  the  things  which  it  needed  ;  and  the 
interchange  of  goods  between  different  sections,  while 
considerable  in  the  aggregate,  was  as  nothing  in  compari- 
son with  modern  domestic  commerce.  The  king's  high- 
ways were  open  to  every  one,  and  though  monopolies 
for  coach  lines  were  sometimes  granted  and  toll  roads 
were  quite  common,  there  was  no  possibility  for  any 
really  harmful  monopoly  in  transportation  to  arise,  be- 
cause the  necessity  of  transportation  was  so  small. 
Some  writer  has  ascribed  all  the  evils  of  modern  railway 
monopolies  to  the  fact  that  in  their  establishment  the 

42 


MONOPOLIES  OF  TRANSPORTATION.  43 

old  principle  of  English  common  law  that  the  king's 
highway  is  open  to  every  man,  was  disregarded.  But  if 
we  sift  down  this  ancient  maxim  of  law  to  its  essential 
principle,  we  find  it  to  be,  there  must  be  no  monopoly  in 
transportation  ;  and  the  problem  of  obtaining  the  advan- 
tages of  modern  railway  transportation  and  keeping  up, 
at  the  same  time,  the  free  competition  that  exists  in 
transportation  on  a  highway  is  seen  to  be  as  far  from 
solution  as  before. 

The  importance  of  our  railway  traffic  is  proven  by  sta- 
tistics. Of  the  total  wealth  annually  produced  in  this 
country,  it  is  probably  a  fair  estimate  to  say  that  ten  per 
cent,  is  paid  for  transportation  of  the  raw  material  and 
finished  goods  in  their  various  journeys  between  pro- 
ducers, dealers,  and  consumers,  and  for  transportation 
of  passengers  whose  journeys  directly  or  indirectly  con- 
tribute to  the  nation's  industry.  That  is  to  say,  the 
gross  yearly  earnings  of  all  the  railroads  and  transporta- 
tion lines  of  the  country  is  about  one  tenth  of  the  total 
value  of  all  the  year's  products.  The  average  is  brought 
down  by  the  amount  of  sustenance  still  consumed  in  the 
locality  where  it  is  produced,  and  by  the  amount  of 
valuable  merchandise.  But  of  the  bulky  products  like 
coal  and  grain,  the  greater  part  of  the  cost  to  the 
remote  consumer  is  due  to  the  cost  of  carriage. 

It  is  also  necessary  to  a  proper  appreciation  of  the 
problem,  that  we  understand  that  railway  transportation 
is  now  as  absolutely  necessary  as  is  the  production  of 
food  and  clothing.  Annihilate  the  railway  communica- 
tions of  any  of  our  great  cities,  and  thousands  would 
perish  by  starvation  before  they  could  scatter  to  agri- 
cultural regions.  There  was  great  suffering  in  many 
small  communities  in  Minnesota  and  Dakota  in  the 


44  MONOPOLIES  AND   THE  PEOPLE. 

severe  winter  of  1887-8,  because  the  heavy  storms 
blockaded  the  railroads  and  prevented  them  from  bring- 
ing in  a  supply  of  coal  and  provisions.  But  it  is  not 
taking  the  question  in  its  broadest  sense  to  consider 
whether  we  could  eke  out  an  existence  without  railway 
communication.  The  fact  is  that  under  modern  condi- 
tions every  man  obtains  all  the  things  which  he  de- 
sires, not  by  producing  them  himself,  but  by  producing 
some  one  thing  which  others  desire.  The  interchange 
between  each  producer  and  each  consumer  must,  broadly 
speaking,  be  all  made  by  means  of  the  railway  ;  and 
without  that,  stores,  factories,  mills,  mines,  and  farms, 
would  have  to  cease  operation. 

Remembering  now  the  importance  and  necessity  of 
transportation,  let  us  inquire  how  the  price  at  which  it 
is  sold  to  the  public,  the  rate  of  fare  and  freight,  is  fixed. 
Is  it  or  can  it  be  generally  fixed  by  competition  ? 

There  are  now  in  the  United  States  about  37,000  rail- 
way stations  where  freight  and  passengers  are  received 
for  transportation.  Now,  from  the  nature  of  the  case, 
not  more  than  ten  per  cent,  of  these  are  or  can  be  at  the 
junction  of  two  or  more  lines  of  railway.  (By  actual 
count,  on  January  i,  1887,  eight  per  cent,  of  existing  sta- 
tions were  junction  points.)  Therefore  the  shippers 
and  buyers  of  goods  at  nine-tenths  of  the  shipping 
points  of  the  country  must  always  be  dependent  on  the 
facilities  and  rates  offered  by  a  single  railway.  Such 
rates  of  transportation  as  are  fixed,  be  they  high  or  low, 
must  be  paid,  if  business  is  carried  on  at  all.  And  when 
we  consider  the  ten  per  cent,  of  railway  stations  which 
are,  or  may  be,  junction  points,  we  find  that  at  least 
three-fourths  of  them  are  merely  the  junction  of  two 
lines  owned  by  the  same  company.  Consolidation  of 


MONOPOLIES  OF  TRANSPORTATION.  45 

railway  lines  has  gone  on  very  rapidly  within  the  past 
few  years  and  is  undoubtedly  destined  to  go  much  fur- 
ther. Of  the  158,000  miles  of  railway  in  the  country, 
about  eighty  per  cent,  is  included  in  systems  500  miles 
or  more  in  extent ;  and  a  dozen  corporations  control 
nearly  half  of  the  total  mileage.  The  benefits  which 
the  public  receive  from  this  consolidation  are  so  vast 
and  so  necessary  that  no  one  who  is  familiar  with  railway 
affairs  would  dream  of  making  the  suggestion  that  fur- 
ther consolidations  be  stopped  or  that  past  ones  be 
undone. 

There  is  a  great  tendency  on  the  part  of  the  public, 
however,  to  look  with  fear  and  disfavor  on  further  rail- 
way consolidation.  And  because  this  is  so,  it  is  greatly 
to  be  desired  that  the  beneficial  effects  of  consolidation 
should  be  better  understood.  The  most  important  bene- 
fits are  included  under  one  head,  the  saving  in  expense 
and  the  avoidance  of  waste,  and  this  is  effected  in  very 
many  different  ways.  Suppose  a  great  system  like  the 
Pennsylvania  or  the  Chicago  &  Northwestern  were  cut 
up  into  fifty  or  sixty  independent  roads,  each  with  its 
own  complete  staff  of  officers.  Each  road  would  have 
to  pay  its  president,  directors,  and  heads  of  operating 
departments,  would  have  to  maintain  its  own  repair- 
shops,  general  offices,  etc.,  and  conduct  in  general  all 
the  business  necessary  to  the  profitable  operation  of  a 
railway  corporation.  A  car  of  wheat  or  a  passenger  in 
going  from  Chicago  to  New  York  would  have  to  be 
transferred  from  one  road  to  another  at  perhaps  twenty 
different  points,  and  the  freight  or  fare  paid  would  be 
divided  among  twenty  different  companies,  with  corre- 
sponding clerical  labor.  The  modern  conveniences  of 
through  tickets,  through  baggage-checks,  and  through 


46  MONOPOLIES  AND   THE   PEOPLE. 

freight  shipments,  would  be  difficult,  if  not  impossible. 
Further,  consolidation  tends  to  produce  vastly  better 
service  and  greater  safety.  The  large  systems  can  and 
do  employ  the  highest  grade  of  talent  to  direct  their 
work.  Every  thing  is  systematized  and  managed  with  a 
view  to  producing  the  best  results  in  efficiency  and 
safety  with  the  least  waste  of  material  and  labor.  And 
while  the  improvement  in  safety  and  convenience  is  all 
for  the  benefit  of  the  public,  a  large  part  of  the  saving 
in  expense  effected  by  consolidation  has  likewise  come 
back  to  the  patrons  of  the  roads  in  the  form  of  reduced 
rates  of  fare  and  freight. 

It  is  difficult,  however,  for  any  one  not  familiar  with 
the  technical  details  of  the  railway  business  to  fully  appre- 
ciate the  importance  and  necessity  of  the  consolidations 
which  have  been  effected,  and  the  grave  results  that 
would  follow  the  realization  of  the  mad  proposition  to 
set  us  back  a  half  century  by  cutting  up  our  railroad  sys- 
tems into  short  local  lines.  It  must  be  plain  to  every 
one,  however,  that  while  the  loss  of  all  the  benefits  of 
consolidation  would  be  certain,  the  gain  in  competition 
could  affect  only  the  few  junction  points  ;  and  as  we 
shall  now  see,  the  effect  even  on  them  would  be  small. 

Assuming  that  the  total  number  of  railway  junction 
points  in  the  United  States  is  3,000,  we  find,  on  exami- 
nation, that  at  about  two-thirds  only  two  lines  meet,  and 
at  more  than  half  the  remainder  only  three  lines  meet. 
It  is  plain  that  in  the  vast  majority  of  cases  where  two 
roads  intersect,  and  in  many  cases  where  three  or  four 
come  together,  the  lines  meet  perhaps  at  right  angles  and 
diverge  to  entirely  different  localities.  The  shipper 
bringing  goods  to  the  station,  then,  may  choose  whether 
he  will  send  his  goods  north  or  east  perhaps  ;  but  only 


MONOPOLIES  OF  TRANSPORTATION.  47 

in  the  few  cases  where  two  lines  run  to  the  same  point 
does  he  really  have  the  choice  of  two  rates  for  getting 
his  produce  to  market.  Practically,  then,  there  are  not, 
and  never  can  be,  more  than  a  few  hundred  places  in  the 
country  where  shippers  will  be  able  to  choose  different 
routes  for  sending  their  goods  to  market.  We  say  there 
never  can  be,  because  the  building  of  a  line  of  railway  to 
parallel  an  existing  line  able  to  carry  all  the  traffic  is  an 
absolute  loss  to  the  world  of  the  capital  spent  in  its  con- 
struction, and  a  constant  drain  after  it  is  built  in  the  cost 
of  its  operation.  This  fact  is  now,  fortunately,  generally 
appreciated. 

But  what  of  the  competitive  traffic  which  exists  be- 
tween commercial  centres,  like  the  trunk-line  traffic  be- 
tween Chicago  and  the  cities  on  the  seaboard,  or  between 
the  former  city  and  the  collecting  centres  farther  west 
like  St.  Paul,  Omaha,  and  Kansas  City  ?  Here,  indeed, 
there  is  competition  ;  and  it  is  of  great  importance  be- 
cause of  the  enormous  bulk  of  the  traffic  which  traverses 
these  few  routes. 

It  is  a  peculiar  feature  of  the  railway  business  which 
we  have  now  to  consider,  and  one  which  is  not  generally 
understood.  We  have  already  perceived  the  principle 
that  competition  cannot  permanently  exceed  a  certain 
intensity  ;  and  the  proof  of  this  principle  in  the  case  of 
the  railway  is  remarkably  plain.  Suppose  two  roads  are 
competing  for  the  traffic  between  Omaha  and  Chicago. 
A  shipper  at  the  former  city  who  wishes  to  send  a  few 
tons  of  freight  to  Chicago  may  go  to  one  company  and 
ask  their  rates,  then  to  the  other  and  induce  them  to  give 
him  a  lower  rate,  and  then  back  to  the  first  again,  until 
he  secures  rates  low  enough  to  suit  him.  Now  it  is  a  fact 
that  either  company  can  afford  to  carry  this  especial 


48  MONOPOLIES  AND  THE  PEOPLE. 

freight  for  less  than  the  actual  cost  of  carrying  it  better 
than  it  can  afford  to  lose  the  shipment.  This  is  because 
it  costs  the  company  practically  no  more  to  carry  the 
goods  than  if  they  were  not  shipped  by  its  line  ;  and 
hence  whatever  is  received  for  the  freight  is  so  much 
profit.  Stated  in  the  form  of  a  principle,  this  fact  is  ex- 
pressed thus  :  Receipts  from  additional  traffic  are  almost 
clear  profit.  Nor  is  this  all.  The  practical  impossibility 
of  distinguishing  additional  traffic  from  other  traffic,  and 
the  enactment  of  State  and  National  laws  requiring  uni- 
form rates  to  be  charged,  places  all  traffic  on  a  common 
basis  ;  and  the  same  cause  which  makes  it  more  profita- 
ble to  carry  additional  traffic  for  a  song  than  to  lose  it, 
makes  it  better  for  a  railroad  to  carry  traffic,  temporarily 
at  least,  for  less  than  the  actual  running  expenses  of  the 
road,  rather  than  to  lose  it.  The  train  and  station  ser- 
vice, the  general  office  and  shop  expenses,  must  all  be 
kept  up,  though  the  freight  and  passengers  carried  dwin- 
dle to  almost  nothing  ;  and  the  capital  invested  in  the 
road  is  a  total  loss,  unless  the  line  is  kept  in  operation 
and  earns  some  income,  even  though  it  be  small.  This 
last  influence,  as  we  shall  see  later,  is  a  most  important 
and  far-reaching  one  in  its  effect  on  industrial  competi- 
tion. 

The  cause  of  the  intensity  of  competition  in  railway 
traffic  is  now  evident.  And  from  what  we  have  seen,  it 
follows  that  two  railway  lines  competing  freely  with  each 
other  cannot  possibly  do  business  at  a  profit.  Let  us  see 
what  are  the  actual  results  of  this  law  of  practical  rail- 
way management.  Evidently  the  managers  of  two  com- 
peting railway  lines  have  but  two  possible  courses  open. 
They  may,  by  tacit  or  formal  agreement,  unite  in  fixing 
common  rates  on  both  the  roads,  or  they  may  attempt  to 


MONOPOLIES   OF    TRANSPORTATION.  49 

do  business  with  free  competition.  But  we  have  already 
proven  that  the  latter  course  must  result  in  reducing  the 
income  of  the  road  certainly  below  the  amount  necessary 
to  pay  the  operating  expenses  and  the  interest  on  the 
bonds,  and  probably  it  will  be  insufficient  to  pay  the 
running  expenses  alone.  The  inevitable  result,  then,  is 
the  bankruptcy  of  the  weaker  road,  the  appointment  of 
a  receiver,  and  its  sale,  in  all  probability  to  its  stronger 
competitor.  This  is  the  chain  of  cause  and  effect  which 
has  wrought  the  consolidation  of  competing  parallel 
roads  in  scores  of  cases,  and  which,  if  free  competition 
is  allowed  to  act,  is  sure  to  do  so. 

We  can  now  appreciate  the  necessity  which  managers  of 
competing  lines  are  under  to  agree  upon  uniform  rates 
for  traffic  over  their  roads,  and  at  the  same  time  the  diffi- 
culty of  doing  this.  The  strange  paradox  is  true  that 
while  it  is  necessary  to  the  continued  solvent  existence  of 
the  competing  corporations  that  such  an  agreement  be 
made,  it  is  also  greatly  to  their  advantage  to  break  it 
secretly  and  secure  additional  traffic.  It  is  necessary, 
therefore,  that  the  parties  to  the  agreement  be  strongly 
bound  to  maintain  it  inviolate ;  and  to  effect  this, 
"  pools  "  were  established.  In  pooling  traffic,  each  com- 
pany paid  either  the  whole  or  a  percentage  of  their  traffic 
receipts  into  a  common  fund,  which  was  divided  among 
the  companies  forming  the  pool,  according  to  an  agreed 
ratio.  Under  this  method  it  is  evident  that  all  incentive 
to  secret  cutting  of  rates  and  dishonest  methods  for  steal- 
ing additional  traffic  from  another  road  was  taken  away. 

How  widespread  and  universal  is  the  restraint  of  com- 
pgtition  by  railway  corporations  may  be  seen  by  the  fol- 
lowing pithy  words,  penned  by  Charles  Francis  Adams, 
President  of  the  Union  Pacific  Railway  : 


50  MONOPOLIES  AND  THE  PEOPLE. 

"  Irresponsive  and  secret  combinations  among  railways  always  have 
existed,  and,  so  long  as  the  railroad  system  continues  as  it  now  is, 
they  unquestionably  always  will  exist.  No  law  can  make  two  corpora- 
tions, any  more  than  two  individuals,  actively  undersell  each  other 
in  any  market,  if  they  do  not  wish  to  do  so.  But  they  can  only  cease 
doing  so  by  agreeing,  in  public  or  private,  on  a  price  below  which 
neither  will  sell.  If  they  cannot  do  this  publicly,  they  will  assuredly 
do  it  secretly.  This  is  what,  with  alternations  of  conflict,  the  railroad 
companies  have  done  in  one  way  or  another  ;  and  this  is  what  they  are 
now  doing  and  must  always  continue  to  do,  until  complete  change  of 
conditions  is  brought  about.  Against  this  practice,  the  moment  it  be- 
gins to  assume  any  character  of  responsibility  or  permanence,  statutes 
innumerable  have  been  aimed,  and  clauses  strictly  interdicting  it  have 
<>f  late  been  incorporated  into  several  State  constitutions.  The 
experience  of  the  last  few  years,  if  it  has  proved  nothing  else,  has 
conclusively  demonstrated  how  utterly  impotent  and  futile  such 
enactments  and  provisions  necessarily  are." 

Disregarding  for  the  present  the  latter  part  of  the 
above  quotation,  consider  the  statement  that  during  the 
whole  history  of  railway  corporations,  agreements  to 
restrain  competition  have  been  the  rule.  This  the 
slightest  research  proves  to  be  an  historical  fact,  and  it  is 
in  perfect  accord  with  our  preceding  statement,  that  such 
agreements  were  necessary  to  the  solvent  existence  of 
railway  corporations.  The  records  also  show  that  in- 
variably when  these  agreements  have  been  broken  and 
competition  has  been  allowed  to  have  full  play,  the  reve- 
nues of  the  roads  have  been  rapidly  reduced  to  a  point 
where,  unless  a  peace  was  effected,  bankruptcy  ensued. 

Mr.  Adams  said,  with  truth,  that  no  law  had  proven  of 
any  effect  in  preventing  these  competition-killing  agree- 
ments between  railways  ;  but  since  the  above  extract  was 
written,  the  Interstate  Commerce  law  has  been  enacted. 
Let  us  pay  some  attention  to  its  working  and  results.  It 
is  a  curious  fact  that  the  framers  of  railway  legislation  in 


MONOPOLIES  OF   TRANSPORTATION.  $1 

this  country,  almost  down  to  the  present  time,  have  con- 
centrated all  their  energies  on  the  endeavor  to  keep  up 
free  competition  ;  and  the  Interstate  law  is  no  exception 
to  this  rule.  The  plan  of  the  Interstate  law  was  about  as 
follows  :  "  Here  are  a  few  dozen  great  commercial  cen- 
tres where  the  railway  lines  of  different  systems  meet. 
We  will  first  prohibit  the  pooling  by  which  they  have  re- 
stricted competition  at  these  points.  Then,  in  order  that 
the  thousands  of  other  shipping  points  shall  receive  an 
equal  benefit,  we  will  enact  a  'long  and  short  haul 
clause,'  obliging  the  rates  charged  to  be  in  some  degree 
proportionate  to  the  distance.  Thus  competition  at  the 
great  centres  will  bring  rates  down  everywhere,  and  the 
public  will  be  benefited." 

For  a  year  after  the  enactment  of  the  law  its  effects 
were  not  prominent.  Pooling  was  abolished,  but  the 
agreements  to  maintain  rates  were  still  kept  up  and  were 
fairly  observed.  But  in  1888,  the  second  year  of  the 
law's  working,  it  came  to  be  realized  that  the  pool  was 
the  vital  strength  of  the  agreement  to  maintain  rates,  and 
that  this  agreement  might  now  be  easily  broken.  Then 
ensued  a  remarkable  season  of  rate  cutting,  which,  at  the 
present  writing,  has  reduced  many  strong  companies  to 
the  verge  of  bankruptcy.  It  is  plain  enough  that  if  this 
is  allowed  to  go  on,  the  various  stages  of  receivership, 
sale,  and  consolidation  will  follow  in  regular  order.  To 
avoid  this  too  sudden  revolution  and  the  general  financial 
disaster  which  all  sudden  revolutions  entail,  the  principal 
companies  in  the  West  are  now  striving  to  combine  in  an 
association  for  the  maintenance  of  rates  by  a  plan  which 
will  bind  them  more  closely  together  than  any  other  ever 
before  adopted.  Thus  to  quote  Mr.  Adams  again  :  "  The 
Interstate  Commerce  law  has  given  a  new  impetus  to  the 


52  MONOPOLIES  AND  THE  PEOPLE. 

process  of  gravitation  and  consolidation,  and  it  is  now 
going  on  much  more  rapidly  than  ever  before.  It  is  at 
this  moment  rapidly  driving  us  forward  toward  some 
grand  railroad-trust  scheme." 

It  is  a  fact  which  we  shall  do  well  to  ponder  over,  that 
this  legislation  intended  to  stimulate  competition  has 
finally  had  just  the  opposite  effect  from  that  which  its 
makers  desired.  They  did  increase  the  intensity  of  the 
competition,  and  have  thereby  nearly  brought  about  a 
permanent  end  to  all  competition  in  railway  traffic. 

It  must  now  be  clear  that  the  railway  is  essentially  a 
monopoly,  not,  be  it  noted,  because  of  any  especial  wick- 
edness of  its  managers  or  owners,  but  because  competi- 
tion is  impossible  as  regards  the  greater  part  of  its  business, 
and  because  wherever  competition  is  possible,  its  effect, 
as  the  managers  well  know,  would  be  to  annihilate  all 
profits  from  the  operation  of  the  road. 

Let  us  consider  now  some  of  the  evils  with  which  this 
monopoly  is  charged.  The  first  of  these  is  discrimination 
between  persons  and  between  places.  A  favored  shipper 
has  been  enabled  to  ruin  his  competitors  because  he 
could  obtain  special  rates,  while  they,  perhaps,  were 
charged  an  extra  amount.  The  strong  monopolies  have 
in  this  way  been  able  to  strengthen  their  hands  for  the 
purpose  of  throttling  their  weak  competitors.  Passenger 
rates,  too,  have  been  low  to  one  class  and  high  to  another  ; 
and  the  system  of  free  passes  has  led  to  great  abuses. 
Discrimination  between  towns  and  cities  and  States  has 
been  hardly  less  serious  ;  and  while  the  railways  were 
permitted  to  make  high  local  rates  and  low  through 
rates,  a  great  stimulus  was  given  to  the  city  at  the  expense 
of  the  country.  The  second  class  of  evils  is  that  rates 
in  themselves  have  been  too  high.  The  railways  have 


MONOPOLIES  OF   TRANSPORTATION.  53 

been  wastefully  built  and  then  capitalized  at  double  their 
actual  cost,  and  it  has  been  attempted  to  pay  dividends 
of  6  to  10  per  cent,  on  these  securities.  In  some  cases 
the  principle  of  charging  "  what  the  traffic  will  bear  "  has 
been  so  applied  that  industries  have  been  ruined  through 
the  absorption  of  their  profits  by  unjust  transportation 
charges.  But  our  space  will  not  permit  a  comprehensive 
review  of  the  many  abuses  of  railway  management.  They 
are  already  familiar  to  the  public.  We  needed  only  to 
refer  to  them  sufficiently  to  carry  on  our  argument  by 
showing  that  the  railroad  monopoly  is  not  by  any  means 
a  harmless  monopoly  if  left  to  work  its  own  pleasure. 

There  are  two  evils  of  our  present  railway  system, 
however,  which  are  not  chargeable  to  monopoly,  but  to 
the  attempt  to  defeat  monopoly,  and  which  are  important  to 
our  discussion.  The  first  is  the  waste  of  competition  in 
railway  traffic  ;  the  second,  the  waste  of  competition  by 
the  construction  and  threatened  construction  of  competing 
lines  where  present  facilities  are  ample  for  the  traffic. 
Of  the  first  it  need  only  be  said  that  in  advertising, 
"  drumming,"  and  soliciting  patronage  the  railways  spend 
many  millions  of  dollars  every  year,  which  comes  out  of 
the  pockets  of  the  public.  The  second  is  most  serious, 
for  it  involves  a  far  greater  waste.  It  is  a  conservative 
estimate  to  say  that  5  per  cent,  of  the  railways  of  the 
country  were  only  built  to  divide  the  profits  of  older 
roads,  and  that  their  owners  would  be  delighted  to-day 
to  have  their  money  back  in  their  possession  and  the 
railroad  wiped  out.  The  millions  these  roads  have  cost, 
the  millions  required  every  year  to  maintain  and  operate 
them,  the  millions  spent  on  proposed  roads  that  never 
reached  completion,  and  the  millions  squandered  in 
fighting  proposed  roads  by  every  means  short  of  actual 


54  MONOPOLIES  AND  THE  PEOPLE. 

bloodshed, — these  are  some  of  the  wastes  which  we  have 
made  in  our  endeavor  to  create  competition  in  railway 
transportation.  And  with  all  our  efforts,  and  notwith- 
standing the  fact  that  until  within  a  short  time  the  public 
sentiment  and  the  railway  managers  have  been  united  in 
the  belief  that  free  competition  was  the  only  mode  of 
regulating  railroad  rates,  we  are  farther  removed  from 
free  competition  now  than  ever  before. 

And  now  consider  in  addition  to  all  this  the  fact  that 
every  railway  company  must  first  of  all  secure  from  the 
State  a  right  to  exercise  the  sovereign  power  of  Eminent 
Domain,  and  that  it  may  and  does  choose  and  take  every 
advantage  of  the  favorable  locations  where  its  road  can 
be  built  most  cheaply ;  which  natural  highways,  moun- 
tain passes,  and  the  like,  are  gifts  of  Nature,  the  right  to 
whose  use  equitably  belongs  to  the  general  public,  and 
not  to  private  parties  exclusively.  Taking  these  facts 
also  into  consideration,  it  seems  needless  to  offer  further 
proof  of  the  fact  that  the  business  of  railway  transporta- 
tion is  essentially  a  monopoly,  and  that  the  attempt 
to  regulate  it  by  competition  must  always  prove  a  failure 
in  the  future,  as  it  always  has  in  the  past. 

Necessarily  we  have  limited  our  discussion  to  the  most 
salient  points,  and  have  not  touched  at  all  many  of  the 
complicated  details  of  the  railway  problem.  In  a  later 
chapter  we  can  study  farther  the  evils  due  to  railway 
monopolies,  and  the  proper  remedies  therefor.  At  pres- 
ent we  have  accomplished  our  purpose  in  finding  out  the 
fact  that  railways  are  monopolies,  and  that  they  are  so  by 
their  inherent  nature. 

Of  monopolies  in  other  forms  of  internal  transporta- 
tion, but  little  need  be  said.  Our  once  busy  canals  and 
great  rivers  seem  destined,  with  the  constant  rapid  im- 


MONOPOLIES  OF  TRANSPORTATION.  55 

provement  and  cheapening  in  the  carriage  of  goods  by 
rail,  to  lose  all  their  former  importance.  The  monopolies 
small  and  great  that  once  held  sway  there  have  all 
vanished  before  their  strong  rival,  the  railway. 

The  use  of  steam  in  the  vessels  that  navigate  the  ocean 
has  had  an  effect  very  similar  to  the  replacing  of  stage- 
coaches and  freight  wagons  by  the  locomotive.  Where 
hundreds  of  sailing  vessels  plied  their  slow  and  uncertain 
trade,  steamer  lines  now  make  trips  only  less  regular  than 
the  railway  itself.  The  only  cause  for  the  existence  of  a 
monopoly  in  ocean  traffic  by  steam  is  the  greatly 
increased  capital  required  for  a  rival  steamship  line  as 
compared  with  that  needed  for  the  old  sailing  vessels. 
We  find  this,  the  requirement  of  a  large  capital,  to  be  a 
feature  of  more  or  less  importance  in  nearly  every 
monopoly  of  the  present  day.  In  this  case,  however, 
unless  there  is  an  artificial  monopoly  in  the  shape  of  gov- 
ernment aid  or  authorization,  the  strength  of  its  capital  is 
the  only  power  the  monopoly  has. 

We  may  reach  a  clear  idea  of  the  essential  nature  of  all 
the  monopolies  considered  in  this  chapter  by  considering 
an  especial  class  of  monopolies  of  communication, 
namely,  mountain  passes,  bridges,  and  ship  canals.  If  a 
person  or  a  railway  corporation  could  secure  sole  control 
of  the  only  pass  through  a  high  mountain  range  separat- 
ing two  wealthy  and  populous  districts  producing  goods 
of  different  sorts,  they  might  exact  a  princely  yearly 
revenue  for  its  use,  equal  to  the  interest  on  the  capital 
required  to  secure  an  equally  favorable  passage  by  tun- 
nelling, or  the  annual  cost  of  sending  goods  over  some 
longer  and  more  expensive  route.  But  under  the  law  no 
private  person  would  be  allowed  to  do  this  ;  and  if  the 
pass  were  a  very  important  and  necessary  one,  probably 


56  MONOPOLIES  AND   THE   PEOPLE. 

no  one  railway  company  would  be  allowed  to  do  so.  The 
law  recognizes  to  some  extent,  and  should  recognize 
much  more  than  it  does,  the  fact  that  the  benefit  of  this 
natural  pathway  is  not  the  property  of  any  one  man  or  set 
of  men,  but  equitably  belongs  equally  to  every  person 
who  needs  to  use  it  directly  or  remotely. 

A  very  large  and  expensive  bridge  is  like  an  important 
mountain  pass,  differing  only  in  that  one  is  the  gift  of 
Nature,  while  the  other  is  wholly  the  work  of  man.  But 
because  the  latter  is  the  work  of  man,  it  does  not  follow 
that  it  is  not  a  monopoly.  The  great  bridge  across  the 
Mississippi  River  at  St.  Louis  is  owned  by  a  private 
company  which  levies  tolls  for  the  teams  and  trains 
passing  over  it.  These  are  deemed  excessive,  as  they  are 
sufficient  to  pay  an  exorbitant  interest  on  the  cost  of  the 
bridge.  Yet  for  many  years  no  one  has  cared  to  invest 
money  in  the  erection  of  a  new  bridge,  for  they  saw  that 
there  was  no  more  traffic  than  one  bridge  could  readily 
carry,  and  they  knew  that  if  a  new  bridge  were  erected,  in 
the  rivalry  in  tolls  which  would  ensue,  the  old-established 
company  would  probably  bankrupt  its  rival.  It  is  thus 
plainly  seen  how  an  important  bridge  may  become  a 
monopoly,  and  a  most  powerful  and  onerous  one. 

We  have  still  one  important  monopoly  of  communica- 
tion to  describe,  the  telegraph.  Viewed  from  a  narrow 
standpoint  it  may  be  thought  that  there  should  be  no 
monopoly  in  the  telegraph.  A  telegraph  line  is  not 
expensive  to  erect  and  maintain,  and  it  gets  no  monopoly 
from  taking  advantage  of  the  most  favorable  route 
through  difficult  country  as  a  railway  does.  But  the 
economy  effected  by  combination  and  the  effect  of  sharp 
competition  in  bringing  about  bankruptcy  and  then  con- 
solidation are  exactly  similar  to  the  case  of  the  railway, 


MONOPOLIES  OF   TRANSPORTATION.  $? 

which  we  have  just  described.  In  the  early  history  of 
telegraph  companies,  many  short  competing  lines  strug- 
gled and  fought  for  supremacy.  In  1859  the  Western 
Union  Telegraph  Company  was  formed  with  the  avowed 
intention  of  combining  these  warring  companies  and 
making  the  telegraph  business  profitable.  It  has  exceeded 
the  most  sanguine  dreams  of  its  promoters  by  swallowing 
up  its  rivals  until  the  entire  system  of  telegraph  commu- 
nication of  the  country  is  practically  in  its  hands.  The 
effects  of  this  consolidation  have  been  of  two  sorts.  On 
the  one  hand  we  have  the  telegraph  service  of  the 
country  performed  with  the  least  possible  work  ;  there  is 
nothing  wasted  in  the  maintenance  of  two  or  more  rival 
offices  in  small  towns  where  one  is  sufficient,  nor  in  oper- 
ating two  lines  of  wire  where  a  single  one  would  serve  as 
well.  All  expense  of  "  drumming  up "  business  in 
various  ways  is  avoided,  and  also  the  cost  of  keeping  the 
complicated  books  necessary  when  the  receipts  of  a 
single  message  must  be  divided  among  several  companies. 
On  the  other  hand  it  is  plain  that  the  public  is  wholly  at 
the  mercy  of  the  monopoly  in  the  matter  of  rates,  and 
must  pay  for  the  use  of  the  telegraph  exactly  what  the 
corporation  asks.  There  is  a  weak  and  foolish  argument 
which  is  often  used  in  an  attempt  to  show  that  this  par- 
ticularly monopoly  is  not  hurtful.  It  is  that  the  telegraph 
is  a  luxury  which  only  wealthy  people  use,  and  hence 
whether  its  rates  are  high  or  low  is  of  little  account.  The 
fallacy  of  this  statement  is  easily  seen.  A  principal  use 
of  the  telegraph  is  to  aid  the  prosecution  of  business  ; 
hence  to  unduly  raise  rates  is  to  cause  an  additional  tax 
on  business, — on  the  carrying  on  of  the  processes  of 
production.  This  tax  will  certainly  have  its  effect,  either 
in  decreased  profits,  decreased  wages,  or  an  increased 


58  MONOPOLIES  AND  THE  PEOPLE. 

price  for  the  product.  Another  large  class  of  telegrams 
are  those  which  are  sent  with  little  thought  of  the  cost,  in 
time  of  sickness,  death,  or  sudden  emergency,  yet  by 
people  whose  purse  feels  severely  the  tax. 

What  to  do  with  this  vast  monopoly  is  one  of  the 
questions  of  the  day,  but  we  will  content  ourselves  at 
present  with  this  investigation  of  its  character,  reserving 
its  proper  treatment  for  later  consideration. 


V. 

MUNICIPAL  MONOPOLIES. 

THE  people  who  live  in  cities  are  far  more  dependent 
on  monopolies  than  the  resident  of  the  country.  The 
farmer  can  still,  on  necessity,  return  to  the  custom  of 
primitive  times,  and  supply  himself  with  food,  clothing, 
fuel,  and  shelter  without  aid  from  the  outside  world  ; 
but  the  city  dweller  must  supply  all  his  wants  by  pur- 
chasing, and  is  absolutely  dependent  on  his  fellow-men 
for  the  actual  necessaries,  as  well  as  the  luxuries  of  life. 
From  the  peculiar  circumstances  of  city  life,  many  mo- 
nopolies arise  in  production  and  transportation  which 
occur  nowhere  else.  One  of  these  is  the  carriage  of 
passengers  on  street  and  suburban  railways.  There 
is  no  better  instance,  perhaps,  of  the  great  power  which 
is  placed  in  the  hands  of  railway  managers  than  this 
matter  of  suburban  passenger  traffic.  One  example  must 
suffice  to  show  this.  Let  us  suppose  that  the  managers 
of  a  railway,  which  has  hitherto  not  been  run  with  a  view 
to  the  development  of  suburban  traffic,  secure  control  of 
several  choice  tracts  of  land  on  the  line  of  their  road  near 
a  growing  city,  and  establish  low  rates  of  commutation 
and  frequent  and  convenient  train  service.  The  land 
which  they  purchased  is  sold  out  in  building-lots  for 
many  times  its  cost,  and  a  number  of  thriving  villages 

59 


60  MONOPOLIES  AND   THE   PEOPLE. 

become  established  there,  inhabited  chiefly  by  people 
whose  business  is  in  the  city  and  who  are  obliged  to 
go  back  and  forth  on  the  trains.  After  a  number  of 
years  the  growth  of  the  towns  becomes  more  sluggish,  and 
the  managers  find  that  the  commutation  traffic  is  not 
after  all  extremely  profitable  ;  therefore  they  lessen  their 
train  service  and  increase  the  rates  of  fare.  Perhaps 
they  may  abolish  commutation  rates  altogether.  It  is  a 
well  known  fact  that  the  value  of  suburban  real  estate 
depends  almost  entirely  on  the  convenience  and  cheap- 
ness of  access  to  the  city.  By  the  removal  and  forced 
sale,  which  many  of  these  people  will  be  obliged  to  make, 
it  may  easily  happen  that  they  may  lose  their  entire 
property.  It  is  not  stated  that  such  flagrant  cases  of 
autocracy  on  the  part  of  railway  managers  are  common. 
Indeed,  it  is  a  high  compliment  to  the  uprightness  and 
probity  of  these  men  that  such  occurrences  are  so  infre- 
quent, and  that  the  temptation,  so  constantly  presented, 
of  enriching  one's  self  at  the  expense  of  the  owners 
of  the  road  and  the  public  is  yielded  to  so  seldom.  But 
there  have  been  cases  where  railway  managers  have 
secured  excellent  train  service  and  low  rates  of  fare  to 
benefit  places  where  they  held  an  interest  in  real  estate, 
while  other  and  competing  places  were  given  poor 
service  and  high  rates.  And  the  entire  abolition  of 
long-established  commutation  rates  has  happened  more 
than  once. 

But  turning  now  to  the  city  railways  proper,  those 
carrying  passengers  through  the  streets,  it  is  evident  at 
first  sight  that  we  have  another  case  where  competition 
is  a  factor  of  little  account.  The  power  of  this  monop- 
oly for  harm  is  greatly  intensified  by  the  fact  that  its  use 
is  largely  a  necessity.  In  all  our  great  cities  the  business 


MUNICIPAL   MONOPOLIES.  6 1 

sections  are  far  removed  from  the  residence  sections,  and 
the  great  mass  of  the  industrial  population  is  obliged  to 
ride  at  least  twice  each  day  in  going  to  and  returning 
from  work.  In  nine  cases  out  of  ten  there  is  one  route 
so  much  more  convenient  than  any  other  as  to  overbal- 
ance any  slight  difference  of  fare.  Thus,  even  on  the 
supposition  that  every  different  line  was  run  in  competi- 
tion with  every  other  line,  the  amount  of  really  competi- 
tive business  would  be  but  a  trifle.  But  besides  this,  as 
is  well  known,  in  a  great  many  cities  consolidation  has 
gone  on  as  rapidly  among  street-railway  companies  as 
among  the  great  trunk-line  railways.  The  three  lines  of 
New  York  elevated  roads  were  originally  projected  by 
rival  companies  ;  but  they  were  not  long  in  coming 
together  under  one  management.  A  Philadelphia  syndi- 
cate has  secured  control  of  most  of  the  street  railways  of 
that  city,  and  in  addition  has  purchased  a  number  of  the 
lines  in  Boston,  Chicago,  Pittsburg,  and  St.  Louis.  Al- 
though the  benefit  in  economy  by  consolidation  is  much 
less  in  the  case  of  street  railways  than  in  the  case  of 
steam  roads,  yet  considerable  is  gained,  and  the  competi- 
tion which  is  killed  by  the  consolidation  is,  as  we  have 
just  seen,  of  no  great  importance  to  the  public.  The  so- 
called  street-railway  trust,  then,  is  really  of  no  great  mo- 
ment. The  monopoly  in  street-railway  traffic  arises 
from  the  nature  of  the  business  rather  than  from  any 
especial  effort  of  capitalists  to  kill  competition. 

But  the  railway  companies  are  not  the  only  monopolies 
which  have  the  use  of  our  city  streets.  Water,  gas,  and 
steam  pipes  beneath  the  pavements,  and  wires,  either  in 
subways  or  strung  overhead,  carrying  electricity  for  street 
and  domestic  lighting,  telegraph,  telephone,  and  messenger 
service,  are  all  necessities  to  our  modern  civilization. 


62  MONOPOLIES  AND  THE   PEOPLE. 

The  absolute  necessity  of  a  public  water  supply,  and 
the  practical  impossibility  in  most  cases  that  any  compe- 
tition in  the  furnishing  thereof  can  be  "established  and 
maintained,  have  led,  in  the  case  of  most  of  our  large 
cities,  to  the  work  of  water  supply  being  undertaken  by 
the  municipal  authorities.  But  many  of  our  smaller 
cities  have  entrusted  to  private  companies  the  work  of 
furnishing  a  water  supply.  While  this  is  a  case  of  real 
monopoly,  yet  under  the  conditions  which  may  be  en- 
forced, most  of  the  power  for  harm  is  taken  away.  Ac- 
cording to  the  best  plan  in  vogue,  the  city  sells  the 
franchise  for  constructing  the  works  to  the  company  who 
bids  to  furnish  water  at  the  lowest  rates  under  definitely 
specified  conditions,  the  franchise  being  sometimes  per- 
petual, but  oftener  granting  to  the  city  at  some  future 
date  an  option  for  the  purchase  of  the  works.  It  is  to 
be  particularly  noticed  that  this  is  a  case  in  which  the 
administration  of  an  absolute  monopoly  has  been  en- 
trusted to  private  enterprise  with  excellent  results  ;  a 
fact  which  may  be  of  use  to  us  in  our  later  investigation. 

While  the  fact  was  early  appreciated  that  a  water  sup- 
ply when  once  introduced  became  an  absolute  necessity, 
it  was  not  recognized  when  illuminating  gas  was  first 
brought  into  use  how  important  it  was  to  become.  Fran- 
chises, or  more  properly  permits,  for  erecting  works  and 
laying  mains  for  supplying  consumers  were  given  away 
to  hastily  formed  companies  ;  and  even  at  the  present 
time  there  are  but  a  few  cities  (only  five  in  the  United 
States)  which  own  their  works  and  mains  for  supplying 
gas.  As  a  matter  of  course  the  gas  companies  saw  their 
advantage.  Knowing  that  gas  once  introduced  was  a 
necessity  at  almost  any  price,  they  made  no  move  toward 
lowering  rates  as  new  and  cheaper  methods  came  into 


MUNICIPAL  MONOPOLIES.  63 

vogue  and  their  output  and  profits  increased.  The  stocks 
of  our  gas  companies  have  been  swollen  by  enormous 
amounts  of  water,  and  upon  this  fictitious  capital  they 
have  continually  paid  enormous  dividends.  At  one  time 
there  was  a  great  call  for  competition  in  the  gas  business. 
The  public  demanded  it,  and  as  usual  the  demand  was 
supplied.  Rival  companies  were  organized,  and  the  city 
authorities  made  haste  to  grant  them  permits  for  laying 
their  mains  in  the  city  streets.  A  war  of  rates  of  course 
ensued,  and  lasted  till  one  company  gave  up  the  fight 
and  sold  out  to  its  rival.  The  consolidated  company 
promptly  increased  its  stock  by  at  least  the  amount  which 
had  been  spent  in  purchasing  and  laying  this  extra  and 
entirely  needless  set  of  gas  mains.  The  public  has  to 
pay  interest  on  this  sum,  and  suffer  besides  the  damage 
done  to  the  pavements  by  tearing  up  and  re-laying. 

In  at  least  twenty  cities  of  the  United  States  has  this 
farce  been  repeated,  and  in  every  case  with  the  same  re- 
sult. It  is  now  generally  acknowledged  that  the  attempt 
to  regulate  the  price  of  gas  by  competition  is  unwise  and 
harmful.  Prof.  E.  J.  James,  of  the  University  of  Penn- 
sylvania, in  a  monograph  entitled  "  The  Relation  of  the 
Modern  Municipality  to  the  Gas  Supply,"  has  treated 
this  subject  most  fully.  He  describes  the  experience  of 
cities  in  England,  France,  and  Germany,  where  competi- 
tion has  been  tried  and  abandoned,  it  being  found  by 
dear  experience  that  the  gas  business  is  necessarily  a 
monopoly.  A  Congressional  Committee,  who  reported 
on  the  application  of  a  rival  gas  company  which  proposed 
to  lay  mains  in  the  city  of  Washington,  declared  that  "  it 
is  bad  policy  to  permit  more  than  one  gas  company  in 
the  same  part  of  the  city."  One  of  the  best  informed 
men  in  the  gas  business  says  :  "  The  business  is  almost 


64  MONOPOLIES  AND  THE  PEOPLE. 

outside  of  the  domain  of  rules  governing  other  enter- 
prises. Competition  is  so  deadly  to  it  that  it  is  impossi- 
ble for  rival  companies  to  occupy  the  same  street  without 
ruin  to  both,  or  without  consolidation  with  its  attendant 
double  investment,  and  cheap  light  is  thus  rendered  an 
impossibility." 

Hon.  T.  M.  Cooley  says  : 

' '  The  supply  of  public  conveniences  to  a  city  is  usually  a  monop- 
oly, and  the  protection  of  the  public  against  excessive  charges  is  to  be 
found  first  in  the  municipal  power  of  control.  Except  in  the  very 
large  cities,  public  policy  requires  that  for  supplying  light  and  water 
there  should  be  but  one  corporation,  because  one  can  perform  the  ser- 
vice at  lower  rates  than  two  or  more,  and  in  the  long  run  will  be  sure 
to  do  so.  In  some  kinds  of  business  competition  will  keep  corpora- 
tions within  bounds  in  their  charges  ;  in  others  it  will  not.  When  it 
will  not,  it  may  become  necessary  to  legislate  upon  profits." 

Considering  it  determined,  therefore,  that  the  gas  in- 
dustry is  a  monopoly,  let  us  inquire  something  of  the 
manner  in  which  this  monopoly  regulates  the  prices  for 
its  service.  According  to  recent  statistics,  collected  from 
683  gas  companies  in  the  United  States,  148  companies 
charge  $2  per  thousand  cubic  feet,  and  145  companies 
charge  $2.50  per  thousand.  It  is  thus  seen  that  rates 
have  been  fixed  to  make  "  even  figures,"  something  which 
does  not  occur  when  margins  of  profit  are  reduced  by 
competition.  The  complete  table  shows  this  fact  more 
fully  as  follows  : 

7  companies  charge  $1.00  per  thousand  cubic  feet. 

32         "  "         1.50    " 

24  "  "  1.75  " 

148  "  "  2.00  " 

57  "  "  2.25  " 

145  "  "  2.50  •'  "  "  " 


MUNICIPAL   MONOPOLIES.  6$, 

20  companies  charge    2.75  per  thousand  cubic  feet. 
86        "  "        3.00    "        "  "        " 

25        "  "        3-5°    "        "  "        " 

19  4.00    " 

120  companies  charge  various  other  prices  per  thousand 
cubic  feet. 

According  to  the  same  authority  these  companies  in 
1886  produced  23,050,706,000  cubic  feet  of  gas,  for  which 
they  received  $40,744,673,  an  average  price  per  M. 
of  $i-76jVff-  According  to  the  statement  of  good  authori- 
ties, gas  can  be  manufactured  at  a  cost  of  50  to  75  cents 
per  M.  in  this  country.  Prof.  James,  in  his  work  before 
quoted,  says  :  "  In  England  at  the  present  time  gas  is  man- 
ufactured at  a  net  cost  of  30  cents  per  thousand  feet ;  some 
works  in  New  England  now  manufacture  it  for  38  cents 
per  thousand  feet  to  the  holder."  The  President  of  the 
American  Gas-Light  Association  is  quoted  as  stating  in 
an  address  before  the  Association  that  the  cost  of  the  gas 
delivered  to  consumers  by  the  South  Metropolitan  Com- 
pany of  London  in  1883  was  39.65  cents  per  thousand, 
and  figuring  by  the  relative  cost  of  coal  and  labor  there 
and  here,  he  stated  that  gas  could  be  delivered  in  New 
York  at  a  cost  of  65  cents  per  thousand.  In  Germany  the 
price  of  gas  to  consumers  varies  from  61  cents  in  Cologne 
to  $1.02  in  Berlin.  Very  recent  improvements  in  pro- 
cesses have  greatly  cheapened  the  cost  of  manufacture. 
Mr.  Henry  Woodall,  the  engineer  of  the  Leeds,  England, 
gas-works,  states  that  coal-gas  costs  in  the  holder  22 
cents  per  thousand.  Of  nineteen  companies  doing  busi- 
ness in  principal  English  cities,  the  average  rate  charged 
consumers  is  52  J  cents,  and  the  average  cost  of  manufac- 
ture is  37^  cents. 


66  MONOPOLIES  AND  THE  PEOPLE. 

The  history  of  the  gas  monopoly  is  repeating  itself  in 
the  matter  of  electric  lighting.  The  smaller  cities  of  the 
country,  in  their  haste  to  "boom,"  are  ready  to  grant  a 
liberal  franchise  to  the  first  firm  or  company  which  offers 
to  supply  an  electric-lighting  system,  trusting  to  future 
competition  to  regulate  prices,  a  resource  that  must  prove 
of  no  avail.  Nor  are  the  men  in  power  in  our  larger 
cities  any  wiser.  The  city  of  New  York  is  taking  every 
means  to  encourage  the  operation  of  rival  electric-light 
companies,  and  is  letting  yearly  contracts  for  street- 
lighting  to  the  lowest  bidder.  It  is  true  that  competition 
is  active  just  now,  but  it  requires  no  far-seeing  eye  to  dis- 
cern the  inevitable  combination  and  consolidation  among 
the  companies. 

Again,  not  only  is  competition  of  this  sort  sure  to  fail, 
but  the  attempt  to  establish  it  is  very  harmful.  To  say 
nothing  of  the  expense  and  waste  of  wealth  which  is  in- 
volved when  rival  companies  are  allowed  to  stretch  their 
wires  and  establish  their  extensive  central  stations  in  the 
same  district,  it  is  everywhere  acknowledged  that  the 
multiplication  of  wires  overhead  is  a  crying  evil  and 
danger.  Are  we  to  double  and  treble  it,  then,  by  per- 
mitting rival  companies  to  place  their  wires  wherever 
they  please  ?  It  is  evident  that  the  temporary  rivalry 
which  we  obtain  in  this  way  is  bought  at  much  too  great 
a  cost.  What  is  true  of  electric  street  light  wires  is 
equally  true  of  the  vastly  greater  multitude  of  wires  which 
belong  to  our  rapidly  growing  system  of  domestic  light- 
ing, and  the  telegraph,  telephone,  and  messenger  service. 
Surely  no  man  knoweth  the  beginning  or  the  end  of  the 
network  which  is  woven  over  our  heads,  and  which,  be- 
sides all  the  useful  wires  already  enumerated,  is  full  of 
"  dead  "  wires,  many  of  them  strung  by  defunct  or  irre- 


MUNICIPAL   MONOPOLIES.  6? 

sponsible  companies,  who  would  never  have  been  allowed 
to  obstruct  the  streets  if  they  had  not  been  "  competing  " 
for  the  business.  Can  there  be  any  doubt  that  it  is  the 
height  of  folly  to  continue  this  work,  and  that  the  only 
rational  way  of  entrusting  electric  service  to  incorporated 
companies  is  to  permit  but  a  single  company  to  operate 
in  a  district  and  control  prices  by  some  other  means  than 
competition  ? 

We  have  the  beginnings  of  other  monopolies  in  our 
city  economies  which  are  destined  to  become  much  more 
important,  but  to  which  we  need  only  refer. 

Steam  for  supplying  heat  and  power  is  beginning  to 
be  distributed  from  great  central  stations,  through  mains 
laid  underground,  to  all  parts  of  the  surrounding  dis- 
trict. The  necessity  for  frequent  repairs  and  stoppage 
of  leaks  renders  it  necessary  to  break  the  pavement  and 
dig  down  to  the  mains  much  oftener  than  is  required 
for  any  other  of  our  underground  furniture.  Nothing 
would  seem  more  evident  than  that  the  number  of  these 
pipes  to  be  laid  should  be  the  fewest  consistent  with  the 
proper  supply  of  the  district,  yet  it  is  a  fact  that  for  a 
time  two  competing  steam  companies  were  permitted  to 
run  riot  in  the  streets  of  lower  New  York,  until  the 
weaker  one  succumbed "  to  over-pressure."  Yet  it  is 
scarcely  to  be  doubted,  that  if  another  rival  company 
were  to  ask  for  a  permit  to  operate  in  the  district  now 
monopolized  by  the  New  York  Steam  Company,  public 
opinion  would  tend  to  favor  the  granting  of  the  permit 
"  because  it  would  give  more  competition."  It  is  to  be 
hoped  that  before  these  great  systems  for  the  distribu- 
tion from  central  stations  of  various  necessities  reach 
much  greater  proportions,  the  public  will  become  edu- 
cated enough  to  perceive  the  folly  of  attempting  to  regu- 
late them  by  competition. 


68  MONOPOLIES  AND  THE  PEOPLE. 

The  necessity  for  this  will  be  more,  rather  than  less, 
apparent  with  the  use  of  underground  instead  of  over- 
head wires.  The  cost  of  placing  wires  in  subways  is  far 
beyond  the  cost  of  stringing  them  on  poles,  and  if  we 
are  obliged  to  build  our  subways  large  enough  to  ac- 
commodate all  the  rival  wires  which  may  be  offered,  we 
have  a  herculean  task  upon  our  hands. 

The  great  question  of  the  monopoly  of  land  can  be 
merely  touched  in  this  connection.  While  the  fact  that 
land  is  natural  wealth  must  be  freely  acknowledged,  it  is 
only  where  population  is  most  dense  that  any  great  mo- 
nopoly appears  in  its  ownership.  The  principle  is  well 
established,  indeed,  that  private  ownership  of  land  can- 
not stand  in  the  way  of  the  public  good.  When  a  rail- 
way is  to  be  built,  any  man  who  refuses  to  sell  right  of 
way  to  the  railway  company  at  a  reasonable  price  may 
have  it  judicially  condemned  and  taken  from  him.  We 
have  already  noted  in  the  chapter  on  railway  monopo- 
lies the  injustice  of  permitting  a  single  person  or  cor- 
poration to  control  and  own  any  especially  necessary 
means  of  communication,  as  a  mountain  pass  or  a  long 
and  expensive  bridge,  and  the  same  principle  is  appar- 
ent in  connection  with  the  railway  terminals  in  our  large 
cities.  The  enormous  expense  attendant  upon  securing 
right  of  way  for  an  entrance  to  the  heart  of  the  city, 
makes  it  a  very  difficult  matter  for  any  new  company  to 
obtain  a  terminus  there,  except  by  securing  running 
rights  over  the  tracks  of  an  older  company.  To  give  to 
any  single  corporation  the  sole  control  of  the  entrance 
to  a  city  and  permit  it  to  charge  what  toll  it  pleases  for 
trains  that  pass  through  it,  evidently  places  the  city  at 
the  mercy  of  a  monopoly.  Practically  the  case  is  not  so 
bad  as  this,  as  most  large  cities  have  means  of  water 


MUNICIPAL  MONOPOLIES.  69 

communication,  and  the  railroads  are  run  to  the  heart  of 
the  city  through  the  public  streets.  But  the  time  is  fast 
approaching  when  these  city  grade  crossings  will  be  done 
away  with,  and  in  every  city  of  importance  the  railways 
will  enter  the  city  on  elevated  viaducts  terminating  in  a 
single  union  depot.  Evidently  it  is  contrary  to  the  pub- 
lic welfare  to  sink  more  capital  in  these  expensive  struct- 
ures than  is  necessary  ;  and  in  general,  several  companies 
will  use  a  single  structure  for  entrance  and  exit.  It  is 
evident  that  the  control  of  these  terminals,  if  vested  in 
a  single  company,  may  give  rise  to  just  the  abuse  we  have 
set  forth  ;  and  that  the  city  itself  should  retain  enough 
control  over  its  railway  terminals  and  freight-transfer 
lines  to  ensure  that  no  single  carrier  or  combination 
shall  monopolize  them. 

In  the  last  analysis  it  is  evident  that  the  monopoly  of 
entrance  to  a  city  is  really  a  monopoly  in  land,  or,  we 
might  more  properly  say,  in  space.  We  are  fortunate  in 
this  country  in  having  millions  of  acres  of  land  still 
awaiting  cultivation  ;  and  while  it  is  not  intended  here 
to  defend  the  policy  of  giving  away  the  estate  of  the 
public  which  our  government  has  pursued,  there  is  no 
danger  for  a  long  time  to  come  that  an  actual  monopoly 
will  exist  in  agricultural  lands.  The  price  of  land  used 
for  business  purposes  in  a  city,  however,  depends  almost 
wholly  upon  its  location.  The  price  at  which  a  single 
block  of  land  near  Wall  Street,  in  New  York  City,  was 
recently  sold  was  so  great  that,  at  the  same  price,  the 
value  of  a  square  mile  would  be  equal  to  half  the  whole 
estimated  wealth  of  every  sort  in  the  United  States. 

Now  the  question  must  occur  to  every  thinking  man, 
by  what  right  does  the  owner  of  this  property  receive 
this  enormous  wealth  ?  To  make  the  case  of  those  who 


JO  MONOPOLIES  AND  THE  PEOPLE. 

advocate  the  public  control  of  the  gifts  of  Nature  more 
clear,  let  us  consider  a  special  case.  Suppose  a  man 
in  an  Eastern  city  chanced  to  come  into  possession  two- 
score  years  ago  of  a  tract  of  land  in  what  is  now  Kansas 
City.  We  may  suppose  that  he  got  it  by  inheritance,  or 
through  some  chance,  and  that,  except  to  pay  the  taxes 
upon  it,  he  has  never  given  farther  attention  to  it.  Dur- 
ing all  the  years  of  the  city's  rapid  growth  he  pays  no 
attention  to  his  land  and  takes  no  part  in  furthering  the 
growth  of  the  city.  At  last,  at  the  height  of  the  real- 
estate  boom,  he  sells  the  land,  and,  whereas  it  cost  him 
in  the  first  instance  a  merely  nominal  sum,  perhaps  $100, 
he  sells  it  now  for  $100,000.  This  value  it  has,  not  be- 
cause of  itself,  as  is  the  case  with  farming  lands,  but 
because  of  its  situation  in  reference  to  the  community 
around  it.  In  other  words,  practically  the  whole  value 
of  this  land  has  been  given  it  by  the  people  who  have 
come  and  built  this  city  around  it.  It  is  their  labor 
that  has  given  this  property  its  value,  and,  in  equity,  the 
value  should  be  theirs.  A  more  detailed  statement  of 
the  arguments  for  the  public  control  of  land  incomes 
cannot  be  given  here.  What  we  are  concerned  with 
here  is  the  extent  to  which  land  is  subject  to  a  mo- 
nopoly. It  appears  too  evident  to  require  further  discus- 
sion that,  as  a  general  rule,  agricultural  lands  in  every 
section  of  the  country  are  competing  to  a  greater  or  less 
extent  with  lands  in  every  other  section,  and  that  the 
lands  used  for  business  purposes  in  the  cities  compete 
likewise,  each  city  with  others  neighboring  and  of  sim- 
ilar size,  while  lands  in  the  same  city  similarly  situated 
compete  with  each  other. 


VI. 

MONOPOLIES   IN   TRADE. 

WE  have  now  examined  the  various  forces  which  are 
destroying  competition  in  the  production  of  goods  in 
our  factories,  and  of  raw  material  from  our  mines  ;  in 
the  transportation  of  these  goods  in  their  various  jour- 
neys between  the  producer  and  the  consumer,  and  in 
the  supply  of  the  especial  needs  of  the  dwellers  in  our 
cities. 

It  is  an  old  and  well-worn  adage  that  "  competition 
is  the  life  of  trade  "  ;  and  if  this  be  true,  we  shall  cer- 
tainly not  expect  to  find  the  men  who  are  earning 
their  living  by  the  purchase  and  sale  of  goods  endeav- 
oring to  take  away  the  life  of  their  business  by  restrain- 
ing or  destroying  competition.  At  first  sight  it  seems  as 
if  it  would  be  a  difficult  matter  in  any  case  to  destroy  com- 
petition in  trade.  The  buyer  and  seller  of  merchandise 
has  no  exclusive  control  over  natural  wealth  ;  no  mine 
or  necessary  channel  of  transportation  is  under  his  di- 
rection ;  nor  does  he  in  his  trade  produce  any  thing,  as 
does  the  manufacturer.  He  only  serves  the  public  by 
acting  the  part  of  a  reservoir  to  equalize  and  facilitate 
the  flow  between  the  consumers  and  producers  ;  and  if 
necessity  requires,  the  two  can  deal  directly  with  each 
other  and  leave  him  out  altogether.  But  in  dealing  with 
the  question  of  monopolies  we  must  not  conclude  that 


72  MONOPOLIES  AND  THE  PEOPLE. 

the  absolute  control  of  supply  is  at  all  necessary  to  the 
existence  of  a  monopoly.  While  there  are  monopolies, 
as  we  have  seen,  which  have  the  keys  to  some  of  the 
necessities  of  civilized  life,  there  are  others  which  con- 
trol merely  some  easier  means  for  their  production,  car- 
riage, or  distribution  ;  and  to  this  latter  class  belong  the 
principal  monopolies  in  trade.  To  be  sure  that  this 
constitutes  a  monopoly,  we  have  but  to  turn  to  the  case 
of  the  mountain  pass  mentioned  in  a  former  chapter. 
The  use  of  that  particular  pass  for  transporting  goods  is 
only  an  easier  means  of  transportation  than  the  detour  to 
some  other  pass  or  by  some  other  route  ;  and  the  degree 
of  power  of  the  monopoly  depends  directly  on  the 
amount  which  is  saved  by  the  use  of  its  facilities.  So 
with  the  monopolies  in  trade.  Brokers  and  jobbers  and 
retail  merchants  form  a  channel  through  which  trade  is 
accustomed  to  pass,  and  through  which  it  can  pass  more 
readily  than  by  any  new  one. 

It  is  to  be  noted  that  under  modern  conditions  the 
power  of  middle-men  has  been  greatly  reduced  from 
what  it  was  formerly.  As  we  have  already  seen,  manu- 
facturing was  then  carried  on  only  in  families  and  small 
workshops,  and  the  mines  which  were  worked  were  prin- 
cipally in  the  hands  of  the  king.  The  merchants  were 
the  wealthy  men  of  olden  time.  They  controlled  largely 
the  transportation  facilities  of  that  day  ;  and  while,  as 
we  have  already  noted,  the  commerce  which  then  ex- 
isted was  but  a  trifle  compared  with  the  present,  the 
principal  exchange  being  in  local  communities,  yet  the 
trade  in  all  articles  which  were  imported,  and  all  domes- 
tic commerce  between  points  any  great  distance  apart 
was  in  the  hands  of  the  merchants. 

It  is  natural,  therefore,  that  we  find  monopolies  in 


MONOPOLIES  IN  TRADE.  73 

trade  to  have  been  among  the  first  which  existed  and  to" 
have  been  of  importance  and  power  when  manufactur- 
ers' trusts  were  not  dreamed  of.  The  guilds  which 
flourished  near  the  close  of  the  Middle  Ages,  while  not 
devoted  to  the  establishment  of  a  monopoly,  did  never- 
theless aim,  in  some  cases  at  least,  to  hinder  competition 
from  those  outside  their  guild. 

But  turning  to  the  present,  let  us  examine  the  condi- 
tions under  which  competition  in  trade  is  checked  to- 
day. Let  us  take,  first,  the  case  of  retail  trade  in  any 
of  the  thousands  of  country  villages  and  petty  trade 
centres  in  the  land.  The  history  of  the  life  of 
the  country  store-keeper  is  a  constant  succession  of 
combinations  and  agreements  with  his  rivals,  inter- 
leaved with  periods  of  "  running,"  when,  in  a  fit  of 
spite,  he  sells  kerosene  and  sugar  below  cost,  and,  to 
make  future  prices  seem  consistent,  marks  down  new 
calico  as  "  shop-worn — for  half  price."  It  is  true  the 
sum  involved  in  each  case  is  a  petty  one,  but  when  we 
consider  the  enormous  volume  of  goods  which  is  dis- 
tributed through  these  channels,  the  total  effect  of  the 
monopoly  in  raising  the  cost  of  goods  to  the  consumer 
must  approach  that  effected  by  monopolies  of  much 
wider  fame.  But  perhaps  it  may  not  seem  evident  that 
this  is  a  monopoly  of  the  same  nature  (not  of  the  same 
degree)  as  a  manufacturers'  trust  or  a  railroad  pool.  It 
certainly  seems  to  be  true  that  the  merchant  has  a  right 
to  do  as  he  chooses  with  his  own  property  ;  and  that  if 
he  and  his  neighbor  over  the  way  agree  to  charge  uni- 
form prices  for  their  goods,  it  is  no  one's  business  but 
their  own.  And,  indeed,  we  are  not  yet  ready  to  take 
up  the  question  of  right  and  wrong  in  this  matter.  That 
the  act  is  essentially  a  "combination  in  restriction  of 


74  MONOPOLIES  AND  THE  PEOPLE. 

competition,"  however,  is  self-evident.  The  degree  of 
this  monopoly  may  vary  widely.  If  the  merchants  who 
effect  this  combination  raise  their  prices  far  above  what 
will  secure  them  a  fair  profit  on  the  capital  invested  in 
their  business,  and  if  it  is  difficult  for  their  customers  to 
reach  any  other  source  of  supply  outside  of  the  combi- 
nation, the  monopoly  will  have  considerable  power.  On 
the  other  hand,  if  the  stores  of  another  village  are  easy 
of  access,  or  if  the  merchants  who  form  the  combina- 
tion fix  their  prices  at  no  exorbitant  point,  the  effect  of 
the  monopoly  may  be  very  slight  indeed. 

We  find  this  class  of  trade  monopolies  most  powerful 
and  effective  on  the  frontier.  Wherever  railroad  com- 
munication is  easy  and  cheap  the  tradesmen  of  different 
towns — between  whom  combinations  are  seldom  formed 
— compete  with  each  other.  The  extension  of  postal, 
express,  and  railway-freight  facilities  to  all  parts  of  the 
country,  too,  have  made  it  possible  for  country  buyers  to 
purchase  in  the  cities,  if  necessary.  Thus  the  railways 
have  been  a  chief  instrument  in  lessening  the  power  of 
this  species  of  monopoly  in  country  retail  trade,  which 
was  of  great  power  and  importance  a  half  century  ago. 

Of  retail  trade  in  the  cities,  it  is  not  necessary  to  speak 
at  length.  Combination  here  has  seldom  been  found 
practicable  because  of  the  great  number  of  competing 
units.  There  is,  however,  a  noticeable  tendency  of  late 
to  the  concentration  of  the  trade  in  large  establishments, 
which  by  their  prestige  and  capital  are  able  to  take  away 
business  from  their  smaller  competitors.  It  does  not 
seem  likely,  however,  that  this  movement  will  result  in 
any  very  injurious  monopoly  among  city  retailers. 

The  wholesale  trade  is  on  quite  a  different  basis  from 
the  retail.  The  number  of  competitors  being  so  much 


MONOPOLIES  IN  TRADE.  75 

less,  combination  is  vastly  easier.  The  tendency  toward 
it  has  been  greatly  fostered  and  strengthened  by  the  for- 
mation of  trusts  among  the  producers.  These  combina- 
tions made  the  manufacturer  more  independent  in  his 
treatment  of  jobbers,  and  disposed  him  to  cut  their  profits 
to  the  lowest  point.  Naturally  these  men  combined  to 
resist  this  encroachment  on  their  income.  They  refused 
to  handle  any  goods  for  less  than  a  certain  minimum 
commission.  It  might  be  possible  in  many  cases  for 
manufacturers  to  sell  directly  to  the  retail  traders,  but  in 
general  the  difficulty  of  changing  old  commercial  chan- 
nels is  such  that  the  friction  and  expense  is  less  if  the 
goods  are  permitted  to  pass  through  the  wholesaler's 
hands.  It  is  to  be  noted  that  one  cause  for  ill-feeling 
between  manufacturer  and  wholesaler  is  the  fact  that 
before  the  days  of  trusts  the  latter  often  reaped  much 
greater  proportionate  profits  than  the  producer  himself. 
But  in  time  this  cause  of  dissension  will  be  forgotten, 
and  the  trust  and  the  wholesalers'  association  will  work 
in  harmony. 

The  point  of  greatest  interest  in  this  is  the  fact  that 
combinations  among  this  first  class  of  middlemen  are 
fostered  and  made  possible  by  the  combination  of  pro- 
ducers. Nor  does  the  series  end  here  necessarily.  The 
increased  price  which  the  retail  dealers  are  obliged  to 
pay  for  the  goods,  with  the  fact  that  others  are  making 
larger  profits,  makes  them  eager  to  do  the  same  ;  and  by 
the  aid  and  co-operation  of  the  wholesale  merchants  they 
may  be  able  to  do  much  toward  checking  competition 
among  themselves  and  increasing  their  profits.  Thus  by 
the  operation  of  the  combination  at  the  fountain-head 
among  the  producers,  there  is  a  tendency  to  check  com- 
petition all  along  the  line,  and  grant  to  each  handler  of 


76  MONOPOLIES  AND  THE  PEOPLE. 

the  goods  between  producer  and  consumer  an  abnormal 
profit.  An  excellent  example  of  this  is  found  in  the  sugar 
trade.  The  wholesale  Grocers'  Guild  of  Canada,  which 
includes  96  per  cent,  of  the  Dominion's  wholesale  trad- 
ers, entered  into  a  compact  with  the  Canadian  sugar  refin- 
ers, who  agreed  that  dealers  outside  of  the  guild  should  be 
charged  30  cents  per  100  pounds  more  for  sugar  than  those 
who  were  in  the  guild.  In  November,  1 887,  fourteen  mem- 
bers of  the  guild  were  expelled  and  were  compelled  to 
pay  the  higher  price.  The  executive  committee  of  the 
guild  fixed  the  selling  price  for  the  retail  dealers.  The 
guild  was  so  successful  with  sugar  that  it  extended  its 
operations  to  starch,  baking  powder,  and  tobacco,  fixing 
prices  for  those  goods  as  well.  The  committee  of  the 
Dominion  Parliament,  appointed  to  investigate  the 
guild,  reported  that  it  was  a  combination  obnoxious  to 
public  interest,  because  it  limited  competition,  advanced 
prices,  and  treated  with  gross  injustice  those  in  the  trade 
who  were  not  its  members.  In  New  York  State  there  are 
two  associations  of  wholesale  grocers  which  are  working 
to  prevent  competition  in  the  sugar  trade.  They  have 
fixed  a  uniform  price  for  sugar,  and  have  tried  to  make 
arrangements  with  the  managers  of  the  sugar  trust  by 
which  that  organization  shall  discriminate  against  all 
grocers  who  are  not  members  of  the  association  by  refus- 
ing to  sell  them  sugar  or  charging  them  a  higher  price. 
In  some  other  sections  an  attempt  has  been,  or  is  being, 
made  by  which  the  retail  grocer  sells  only  at  certain  fixed 
prices  determined  by  a  committee  of  the  wholesalers  who 
issue  each  week  a  card  of  rates.  It  is  urged  in  defense 
of  the  movement  that  sugar  has  been  sold  at  an  actual 
loss  by  both  the  wholesale  and  retail  trade  for  a  very  long 
time.  The  Grocers'  Association,  at  its  first  meeting, 


MONOPOLIES  IN  TRADE.  77 

passed  a  resolution  declaring  that  it  was  opposed  to  com- 
binations for  the  purpose  of  extorting  unreasonable 
profits  from  the  public,  and  that  all  that  was  sought  was 
to  prevent  the  evil  of  handling  certain  staples  below  the 
cost  of  doing  the  business.  But  if  we  inquire  why  these 
staples  have  been  handled  at  a  loss,  the  answer  is,  because 
of  the  strong  competition  which  has  prevailed.  The 
organization,  then,  is  a  combination  to  limit  competition, 
to  suppress  it,  in  fact,  and  the  difference  between  its  pur- 
pose and  work  and  that  of  the  Sugar  Trust  is  a  difference 
of  degree  and  not  of  kind.  The  reason  for  its  moderate 
demands  may  be  because  grocers  are  more  liberal- 
hearted  than  refiners,  or  because  they  understand  that 
their  power  over  the  trade  is  more  limited  than  those 
who  control  the  original  product,  so  that  an  attempt  to 
exact  too  large  profits  would  offer  a  tempting  premium 
to  competitors  of  the  Association. 

Another  staple  article  of  consumption  in  which 
combinations  are  known  to  exist  is  meat.  It  is  affirmed 
that  a  combine  of  buyers  and  slaughterers  controls  the 
markets  of  Chicago  and  Kansas  City,  and  both  depresses 
the  price  paid  for  cattle  in  the  market,  and  raises  the 
price  of  beef  to  the  retail  dealer.  This  monopoly  proved 
so  oppressive,  and  attracted  so  much  attention,  that  in 
February,  1889,  Gov.  Humphrey  of  Kansas,  called  a  con- 
vention of  delegates  from  the  legislatures  of  ten  different 
States  and  Territories  to  devise  a  system  of  legislation, 
to  be  recommended  for  adoption  by  the  several  States, 
which  should  destroy  the  power  of  the  combination. 

One  of  the  combinations  investigated  by  the  New 
York  State  Committee  appointed  to  investigate  trusts 
and  similar  organizations,  was  an  association  of  the  retail 
butchers,  and  the  brokers  buying  sheep,  lambs,  calves, 


78  MONOPOLIES  AND  THE   PEOPLE. 

etc.,  from  the  farmers.  The  purpose  of  the  association 
is  to  prevent  competition  among  its  members  and  keep 
control  of  prices  in  its  own  hands  by  charging  a  higher 
price  to  outsiders  than  to  members  of  the  association. 
The  ultimate  effect  is  to  increase  profits  by  paying  less 
for  the  animals  and  getting  higher  prices  for  the  meat 
sold. 

We  might  go  on  at  indefinite  length  to  examine  the 
various  monopolies  of  this  sort,  but  it  does  not  seem 
necessary.  The  salient  fact  which  is  evident  to  any 
one  at  all  conversant  with  business  affairs  is,  that  in 
almost  every  line  of  trade  the  restriction  of  competition 
is  in  force  to  a  greater  or  less  extent.  Those  monopo- 
lies are  strongest,  indeed,  which  have  control  of  pro- 
duction ;  but  in  so  far  as  they  can  control  the  market, 
the  men  engaged  in  buying  and  selling  are  equally 
ready  to  create  minor  monopolies,  and  an  acquaintance 
with  the  general  markets  convinces  one  that  these  mo- 
nopolies are  numerous  enough  to  have  a  very  important 
effect  in  increasing  the  cost  of  goods  to  the  consumer. 

We  are  accustomed  to  think  of  competition  as  a  force 
which  always  tends  to  keep  prices  down,  and  of  a  mo- 
nopoly as  always  raising  prices  ;  but  it  should  be  un- 
derstood that  this  is  true  only  of  the  competition  and 
monopolies  among  sellers  of  goods.  It  must  be  remem- 
bered that  the  competition  among  buyers  is  a  force 
which  acts  in  the  opposite  direction  and  tends  to  raise 
prices  ;  and  that  it  is  quite  possible  to  have  combinations 
among  buyers  to  restrict  competition  and  keep  prices 
down.  Of  course,  where  the  buyer  is  the  final  con- 
sumer, this  is  almost  impossible,  for  the  great  number 
of  competitors  forbids  any  permanent  combination.  Also 
where  the  product  concerned  is  a  manufactured  article 


MONOPOLIES  IN  TRADE.  79 

or  a  mineral  product,  the  mining  or  manufacturing  com- 
pany or  firm  will  generally  have  capital  enough  and 
business  ability  enough  to  defeat  any  attempt  of  the 
wholesale  merchants  to  combine  to  reduce  the  prices 
paid  for  their  output.  This  he  can  easily  do  by  selling 
to  retail  dealers  direct.  But  in  the  case  of  products 
gathered  from  the  farmers  the  case  is  different,  and  the 
producer  can  less  easily  protect  himself  against  com- 
binations among  buyers  to  fix  the  price  he  shall  receive. 
The  power  and  extent  of  these  monopolies  varies  with 
the  distance  of  the  farmer  from  markets,  and  also,  it 
must  be  said,  with  the  intelligence  and  shrewdness  of 
the  farmer.  In  districts  remote  from  railways  and  mar- 
kets the  farmers  are  often  dependent  on  the  travelling 
buyers  for  a  chance  to  sell  their  cattle  or  produce.  In  a 
thinly  settled  region  there  may  be  no  more  than  two  or 
three  times  in  a  season  when  a  farmer  will  have  an  op- 
portunity to  dispose  of  his  surplus  products  ;  and,  real- 
izing his  necessity,  he  is  apt  to  be  beaten  down  to  a 
much  lower  price  than  the  buyer  would  have  given  if 
other  buyers  had  been  competing  with  him  to  secure  the 
goods.  In  the  chief  markets,  too,  there  is  often  a  com- 
bination of  buyers  formed  to  keep  down  prices.  The 
combine  of  cattle-buyers  in  Kansas  City  and  Chicago 
has  just  been  noted.  The  New  York  Legislative  Com- 
mittee discovered  that  a  milk  trust  had  control  of  the 
supply  of  milk  for  New  York  City,  fixing  the  price  paid  to 
the  farmer  at  three  cents  per  quart,  and  the  selling  price 
at  7  or  8  cents  per  quart.  According  to  the  suit  brought 
by  the  Attorney-General  of  Louisiana  against  the  Cot- 
ton-Seed Oil  Trust,  that  monopoly  has  reduced  the  price 
paid  to  the  planters  for  seed  from  $7  to  $4  per  ton.  As 
the  total  amount  of  cotton  seed  which  it  purchases  is 


80  MONOPOLIES  AND  THE  PEOPLE. 

about  700,000  tons  a  year,  it  is  evident  that  this  feature 
of  the  combination  alone  puts  into  the  pockets  of  the 
owners  of  the  Trust  over  two  million  dollars  per  annum, 
over  and  above  the  profits  made  through  its  control  of 
the  cotton-seed  oil  market.  Evidently  the  combinations 
which  lower  prices  by  restricting  competition  among 
purchasers  are  not  to  be  overlooked  because  of  unim- 
portance. 

In  the  chapter  on  monopolies  of  mineral  wealth  it  was 
stated  that  the  French  copper  syndicate  is  not  a  "  trust," 
but  a  "  corner."  It  has  not  been  common  to  consider 
"  corners "  as  a  species  of  monopoly,  except  as  they 
have,  like  the  latter,  acquired  a  bad  reputation  with 
the  general  public  from  their  effect  in  raising  the  price 
of  the  necessaries  of  life.  But  if  we  look  at  the  matter 
carefully,  it  becomes  plain  that  the  aim  of  the  maker  of 
corners  is  the  same  exactly  as  that  of  the  organizer  of 
trusts, — to  kill  competition.  The  difference  lies  in  the 
fact  that  the  "  corner  "  is  a  temporary  monopoly,  while 
the  trust  is  a  permanent  one.  The  man  who  forms  a 
corner  in,  let  us  say,  wheat,  first  purchases  or  secures  the 
control  of  the  whole  available  supply  of  wheat,  or  as 
near  the  whole  supply  as  he  can.  In  addition  to  this  he 
purchases  more  than  is  really  within  reach  of  the  market, 
by  buying  "futures,"  or  making  contracts  with  others 
who  agree  to  deliver  him  wheat  at  some  future  time.  Of 
course  he  aims  to  secure  the  greater  part  of  his  wheat 
quietly,  at  low  figures  ;  but  after  he  deems  that  the  sup- 
ply is  nearly  within  his  control,  he  spreads  the  news 
that  there  is  a  "  corner  "  in  the  market,  and  buys  openly 
all  the  wheat  he  can,  offering  larger  and  larger  prices, 
until  he  raises  the  price  sufficiently  high  to  suit  him. 
Now  the  men  who  have  contracted  to  deliver  wheat  to 


MONOPOLIES  IN  TRADE.  8 1 

him  at  this  date  are  at  his  mercy.  They  must  buy  their 
wheat  of  him  at  whatever  price  he  chooses  to  ask,  and  de- 
liver it  as  soon  as  purchased,  in  order  to  fulfil  their  con- 
tracts. Meanwhile  mills  must  be  kept  in  operation,  and 
the  millers  have  to  pay  an  increased  price  for  wheat ;  they 
charge  the  bakers  a  higher  price  for  flour,  and  the  bakers 
raise  the  price  of  bread.  Thus  is  told  by  the  hungry 
mouths  in  the  poor  man's  home,  the  last  act  in  the 
tragedy  of  the  "  corner." 

Fourier  tells  of  an  event  in  his  early  life  which  made  a 
lasting  impression  on  him.  While  in  the  employ  of  a 
mercantile  firm  at  Marseilles,  his  employers  engaged  in 
a  speculation  in  rice.  They  purchased  almost  all  the 
available  supply  and  held  it  at  high  prices  during  the 
prevalence  of  a  famine.  Some  cargoes  which  were  stored 
on  shipboard  rotted,  and  Fourier  had  to  superintend  the 
work  of  throwing  the  wasted  grain,  for  the  want  of  which 
people  had  been  dying  like  dogs,  into  the  sea.  The 
"  corners  "  of  the  present  day  are  no  less  productive  of 
discontent  with  the  existing  state  of  society  than  were 
those  of  Fourier's  time. 

But,  returning  to  our  subject,  it  should  be  said  that 
the  "  corner,"  generally  speaking,  does  much  less  injury 
to  the  public  than  is  commonly  supposed.  As  we  have 
shown,  the  manipulators  of  the  corner  make  their  chief 
profits  from  other  speculators  who  operate  on  the  oppos- 
ing side  of  the  market ;  and  it  is  but  a  small  part  of 
their  gains  which  is  taken  from  the  consumers.  The 
effect  on  the  consumer  of  the  abnormal  rise  in  price 
caused  by  the  corner  is  sometimes  quite  made  up  for 
by  the  abnormal  fall  which  occurs  when  the  corner 
breaks.  Generally,  however,  the  drop  in  prices  will  be 
slower  to  reach  down  to  the  final  consumer,  past  the 


82  MONOPOLIES  AND  THE  PEOPLE. 

middlemen,  than  will  the  higher  prices.  The  corner 
makers  also  are  apt,  if  they  are  shrewd  and  successful,  to 
make  the  total  of  their  sales  for  the  current  supply  yield 
them  a  profit.  Thus  suppose  that  the  normal  price  of 
wheat  is  70  cents  per  bushel,  and  that  the  syndicate 
secures  control  of  five  million  bushels  at  the  normal 
price.  If  while  it  keeps  the  price  up  it  sells  two  million 
bushels  at  $1.20  per  bushel,  it  can  afford  to  get  rid  of 
the  rest  of  its  stock  at  an  average  price  as  low  even  as  50 
cents  per  bushel,  and  still  make  four  hundred  thousand 
dollars'  profit. 

The  operations  of  corner  makers  are  confined  princi- 
pally to  goods  which  are  dealt  in  upon  commercial  ex- 
changes. One  evident  reason  for  this  is  that  the  vast 
purchases  and  sales,  which  are  necessary  in  the  formation 
of  a  corner  are  impossible  without  the  facilities  afforded 
by  an  exchange.  It  must  be  said,  too,  that  the  plain 
truth  is  that  our  principal  commercial  exchanges,  while 
they  do  serve  certain  useful  purposes,  are  yet  practically 
devoted  chiefly  to  speculation.  This,  simmered  down  to 
its  essence,  means  that  the  business  of  the  speculators  is 
to  bet  on  the  future  prices  of  the  articles  dealt  in, — a 
game  in  which  the  largest  players  are  able  to  influence 
prices  to  accord  with  their  bets,  and  hence  have  their 
"  lamb  "  opponents  at  an  obvious  disadvantage.  The  evil 
of  this  sort  of  commercial  gambling  is  recognized  by 
practical  men  of  every  class  ;  but  its  cure  is  yet  to  be 
effected. 

A  sort  of  business  allied  both  to  trade  and  transporta- 
tion is  the  business  of  storage  or  warehousing,  and  this 
has  recently  shown  some  interesting  cases  of  monopoly. 

The  owners  of  warehouses  along  the  Brooklyn  water- 
front combined  their  business  in  January,  1888,  and 


MONOPOLIES  IN  TRADE.  83 

doubled  their  rates  for  storage.  In  the  testimony  of  one 
of  the  members  of  this  trust,  before  the  New  York  Legis- 
lative Committee,  he  said  :  "  We  want  to  destroy  com- 
petition all  we  can.  It  is  a  bad  thing."  The  owners  of 
grain  elevators  at  Buffalo,  N.  Y.,  have  long  combined  to 
exact  higher  prices  for  the  transfer  of  grain  than  would 
have  prevailed  were  free  competition  the  rule.  At  the  ses- 
sion of  1887  the  New  York  Legislature  took  the  bull  by 
the  horns  and  enacted  a  law  fixing  a  maximum  rate  for  ele- 
vator charges  ;  a  statute  which  was  based  on  the  popular 
demand  for  its  enactment,  but  is  hard  to  accord  with 
the  principles  of  a  free  government. 

There  are  a  number  of  lines  of  business  auxiliary  to 
trade  in  which  competition  is  more  or  less  restricted  by 
the  fact  that  the  amount  of  capital  controlled  and  the 
prestige  of  the  established  firms  renders  it  a  difficult 
and  risky  matter  to  start  a  new  and  competing  firm.  The 
insurer  of  property  or  life,  if  he  be  wise,  will  demand 
financial  stability  as  a  first  requisite  for  the  company  in 
which  he  takes  a  policy.  The  companies  engaged  in  the 
business  of  fire  insurance  have  long  been  trying  to  agree 
on  some  uniform  standard  of  rates  and  the  avoidance  of 
all  competition  with  each  other.  These  combinations, 
however,  are  apt  to  be  broken,  as  soon  as  formed,  by  the 
weaker  companies,  whose  financial  condition  operates  to 
prevent  them  from  getting  their  share  of  the  business  under 
uniform  rates.  Even  when  this  rate-cutting  is  stopped, 
there  is  still  competition  to  be  met  from  the  various  small 
mutual  companies,  who  are  necessarily  outside  the  com- 
bination. 

Banks  are  a  necessity  to  the  carrying  on  of  modern 
commerce,  and  they  have  great  power  over  the  financial 
affairs  of  the  business  men  of  the  community  which  they 


84  MONOPOLIES  AND   THE   PEOPLE. 

serve.  As  a  general  rule,  however,  they  are  largely  owned 
by  the  merchants  and  others  who  patronize  them,  and  the 
instances  of  this  power  being  abused  are,  therefore,  not 
common.  It  is  to  be  remembered,  in  discussing  this,  as  in 
other  monopolies,  that  the  power  of  a  monopoly  depends 
entirely  upon  its  degree.  A  bank,  trust  company,  or  real- 
estate  guaranty  company  which  has  a  great  capital,  an 
established  reputation  for  safety  and  conservatism,  sole 
control  of  many  special  facilities,  and  conveniences  for 
obtaining  and  dispatching  business,  has  a  real  monopoly, 
whose  degree  varies  with  the  tendency  people  have  to 
patronize  it  instead  of  some  weaker  competitor,  if  one 
exists.  There  is  no  evil  effect  from  the  monopoly  upon 
the  community,  unless  it  takes  advantage  of  its  power  to 
charge  a  sum  greater  than  their  real  worth  for  the  servi- 
ces it  renders,  or  uses  it  to  discriminate  to  the  injury  of 
special  persons  or  places. 

In  closing  our  discussion  of  the  monopolies  in  trade, 
there  is  an  important  point  to  be  noted.  In  the  lines  of 
industry  considered  in  the  preceding  chapter,  the  mo- 
nopoly was  easy  of  maintenance  because  it  held  full 
control  of  the  source  of  production,  or  of  some  nec- 
essary channel  through  which  commerce  must  pass. 
No  gift  of  nature  assists  to  maintain  a  monopoly  in  trade. 
It  must  be  wholly  artificial,  and  it  relies  for  its  strength 
simply  on  the  adherence  of  its  members  to  their  agree- 
ment to  maintain  prices.  Its  degree  of  power  can  never 
be  great,  compared  with  monopolies  which  control  the 
original  sources  of  production  ;  for  if  it  is  attempted  to 
put  up  prices  inordinately,  competition  will  start  up  out- 
side of  the  combination,  or  the  consumer  will  be  led  to 
deal  directly  with  the  producer. 

Because   of  this  weakness,  the  temptation  is  great  for 


MONOPOLIES  IN  TRADE.  8$ 

these  monopolies  to  strengthen  themselves  in  ways  quite 
indefensible  on  any  score.  The  alliance  of  trade  monopo- 
lies with  trusts,  in  order  to  strengthen  themselves,  we 
have  already  considered.  But  the  trust  which  makes 
such  an  alliance  must  plead  guilty  to  the  charge  of  dis- 
crimination as  well  as  monopoly,  It  is  bad  enough  to 
raise  the  prices  of  the  necessaries  of  life,  and  force  the 
whole  community  to  pay  the  tax  ;  but  it  is  worse  to  add 
to  this  the  crime  of  discrimination  against  certain  persons 
in  the  community,  at  the  instance  of  a  minor  monopoly. 

But  the  trade  monopoly  does  not  confine  its  sins  to 
tempting  the  stronger  monopoly  to  practise  discrimina- 
tions. It  practises  discrimination  itself  in  some  very 
ugly  forms.  A  combination  among  manufacturers  of 
railway  car-springs,  which  wished  to  ruin  an  independent 
competitor,  not  only  agreed  with  the  American  Steel 
Association  that  the  independent  company  should  be 
charged  $10  per  ton  more  for  steel  than  the  members  of 
the  combine,  but  raised  a  fund  to  be  used  as  follows  : 
When  the  independent  company  made  a  bid  on  a  con- 
tract for  springs,  one  of  the  members  of  the  trust  was 
authorized  to  underbid  at  a  price  which  would  incur  a 
loss,  which  was  to  be  paid  for  out  of  the  fund.  In  this 
way  the  competing  company  was  to  be  driven  out  of 
business.  It  is  often  argued  that  combinations  to  ad- 
vance prices  can  never  exist  long,  because  of  the  pre- 
mium which  the  advanced  price  puts  upon  the  entrance 
to  the  field  of  new  competitors  ;  but  the  weapons  which 
this  trust  used  to  ruin  an  old  and  strong  competitor  are 
even  more  effectual  against  a  new-comer  ;  and  the  knowl- 
edge that  they  are  to  meet  such  a  warfare  is  apt  to  deter 
new  competitors  from  entering  the  field. 

The   boycott   was  once  deemed   rather   a   degrading 


86  MONOPOLIES  AND  THE  PEOPLE. 

weapon  of  warfare  ;  but  now  the  term  has  grown  to  be 
a  familiar  one  in  trade  circles.  Even  the  great  railway 
companies  do  not  scruple  to  use  the  boycott  in  fighting 
their  battles.  One  might  imagine  that  both  the  thing 
and  the  name  filled  a  long  felt  want. 


TO 

MONOPOLIES  DEPENDING  ON  THE  GOVERNMENT. 

THE  fact  has  been  already  referred  to  that  the  princi- 
pal monopolies  which  existed  previous  to  the  present 
century  were  those  created  by  government.  In  the  days 
when  governments  were  less  strong  than  now,  and  less 
able  to  raise  money  by  such  taxes  as  they  chose  to  assess, 
it  was  a  very  convenient  way  to  replenish  the  king's  ex- 
chequer to  sell  the  monopoly  of  a  certain  trade  to  some 
rich  merchant.  Nor  was  the  establishment  of  these 
monopolies  entirely  without  just  reason.  In  those  days 
of  scarce  and  timid  capital,  inducements  had  to  be  held 
out  to  encourage  the  establishment  of  new  enterprises. 
An  instance  of  this,  familiar  to  every  one,  was  the  grant 
to  the  owners  of  the  first  steamboat  of  the  sole  right 
to  navigate  the  Hudson  River  by  steam  for  a  term  of 
years.  In  the  early  history  of  the  nation  and  in  colonial 
days,  government  grants  to  establish  local  monopolies 
were  very  common.  In  this,  however,  we  only  followed 
the  example  of  the  mother  country,  which  had  long 
granted  limited  monopolies  in  trade  and  transportation 
as  a  means  of  encouraging  new  enterprises  and  the  in- 
vestment of  capital. 

The  monopolies  of  the  present  day  which  are  properly 
considered  as  government  monopolies  are  of  two  classes. 

87 


88  MONOPOLIES  AND  THE   PEOPLE. 

The  essential  principle  on  which  all  are  based  is  that  their 
establishment  is  for  the  common  benefit,  real  or  sup- 
posed ;  but  the  first  class — to  which  belong  the  patents 
and  copyrights — are  also  justified  on  the  ground  that  the 
brain  worker  should  be  protected  in  his  right  to  reap 
the  just  profits  from  his  labor. 

The  effect  of  a  copyright  is  simply  to  make  it  possible 
for  an  author  to  receive  some  recompense  from  his  work. 
He  can  only  do  this  by  selling  it  in  printed  form  to  those 
who  may  wish  to  buy  ;  but  if  there  were  no  copyright, 
any  printer  might  sell  duplicates  of  the  book  as  soon  as 
it  was  issued,  and  could  sell  them  at  a  much  less  price 
than  the  original  edition,  as  the  book  would  have  cost 
him  nothing  to  prepare.  The  practical  result  would  thus 
be  that  few  could  afford  to  spend  study  and  research  in" 
writing  books,  and  the  volumes  which  would  be  printed 
would  be  apt  to  be  only  those  of  so  cheap  and  worthless 
a  sort  that  no  one  would  take  the  trouble  to  copy  them. 
The  monopoly  produced  by  a  copyright  takes  nothing 
from  the  public  which  it  previously  enjoyed.  The  writer 
of  a  book  creates  something  which  did  not  before  exist  ; 
and  if  people  do  not  wish  to  buy  that  which  he  has 
created,  they  are  at  perfect  liberty  not  to  do  so.  The 
monopoly  relates  only  to  the  production  and  sale  of  that 
particular  book.  Others  are  at  liberty  to  write  similar 
books  upon  the  same  subject,  which  will  compete  with 
the  first  ;  and  the  same  information  may  be  given  in 
different  words  without  infringing  the  copyright. 

It  seems  clear  enough,  then,  that  the  monopoly  which 
occurs  in  the  use  of  a  copyright,  is  of  an  entirely  differ- 
ent sort  from  the  monopolies  which  we  have  previously 
considered.  Competition  is  not  destroyed  by  it,  and 
its  only  effect  upon  the  public  relates  to  an  entirely  new 


GOVERNMENT  MONOPOLIES.  89 

production,  which  is  not  a  necessity,  and  which  the 
public  could  not  have  had  an  opportunity  to  enjoy  if 
the  copyright  law  had  not  made  it  possible  for  the  author 
to  write  the  book  with  the  prospect  of  being  repaid  for 
his  labor  by  the  sale  of  the  printed  volume. 

As  already  stated,  the  granting  of  patents  is  based  on 
the  same  principle  as  the  granting  of  copyrights.  A 
clause  of  the  Constitution  empowers  the  general  gov- 
ernment to  grant  to  authors  and  inventors  for  limited 
periods  the  exclusive  right  to  their  respective  writings 
and  discoveries. 

If  we  judge  the  granting  of  patents  by  the  aims  and 
intentions  which  are  held  in  the  theory  of  the  law,  we 
must  conclude  that  it  is  a  highly  wise,  just,  and  beneficial 
act.  The  man  who  invents  a  new  machine  or  device 
which  benefits  the  public  by  making  easier  or  cheaper 
some  industrial  operation,  performs  a  valuable  service  to 
the  world.  But  he  can  receive  no  reward  for  this  service, 
if  any  one  is  at  liberty  to  make  and  sell  the  new  machine 
he  has  invented  ;  and  unless  the  patent  laws  gave  him 
the  power  to  repay  himself  for  the  labor  and  expense  of 
planning  and  designing  his  new  device,  it  is  altogether 
probable  that  he  would  not  spend  his  time  in  inventing. 

The  wealth  which  a  valuable  patent  promises  has  been 
a  great  incentive  to  the  work  of  inventors,  and  has  un- 
doubtedly been  a  chief  cause  of  the  great  mechanical 
advancement  of  the  last  half  century.  But  the  state  of 
mechanical  science  has  greatly  changed  from  what  it  was 
when  the  clause  of  the  Constitution  was  penned  which 
speaks  of  inventions  as  "  discoveries."  The  trained  me- 
chanical designer  now  perfects  a  machine  to  do  a  given 
work,  with  almost  the  same  certainty  that  it  will  be  suc- 
cessful in  its  operation  that  he  would  feel  if  the  machine 


9O  MONOPOLIES  AND  THE  PEOPLE. 

were  an  old  and  familiar  one.  The  successful  inventor 
is  no  longer  an  alchemist  groping  in  the  dark.  His  task 
is  simply  to  accomplish  certain  results  with  certain  known 
means  at  his  disposal  and  certain  well-understood  scien- 
tific principles  to  guide  him  in  his  work.  But  this  state- 
ment, too,  must  be  qualified.  There  are  still  inventions 
made  which  are  the  result  of  a  happy  inspiration  as  well 
as  of  direct  design.  Not  all  the  principles  of  mechanical 
science  and  the  modes  of  reaching  desired  ends  are  yet 
known  or  appreciated  by  even  the  best  mechanical  engi- 
neers. There  is  still  room  for  inventors  whose  rights 
should  be  protected.  The  interpreters  of  our  patent 
laws  have  always  held  the  theory  that  the  use  of  a  natu- 
ral agent  or  principle  could  not  be  the  subject  of  a  patent. 
This  is  undoubtedly  wise  and  just.  The  distinction 
should  always  be  sharply  drawn  between  those  existing 
forces  of  nature  which  are  as  truly  common  property  as 
air  and  sunlight,  and  the  tool  or  device  invented  to  aid 
in  their  use. 

Again,  it  is  a  notorious  fact  that  the  great  multiplicity 
of  inventions  has  made  the  search  to  determine  the  nov- 
elty of  any  article  submitted  for  a  patent  for  the  most 
part  a  farce.  No  one  is  competent  nowadays  to  say 
surely  of  any  ordinary  mechanical  device  that  it  is  abso- 
lutely new.  The  bulky  volumes  of  Patent-Office  reports 
are  for  the  most  part  a  hodge-podge  of  crude  ideas,  re- 
peated over  and  over  again  under  different  names,  with 
just  enough  valuable  matter,  in  the  shape  of  the  inventions 
of  practical  mechanical  designers  and  educated  inventors, 
to  save  the  volumes  from  being  an  entire  waste  of  paper 
and  ink.  Space,  however,  will  not  permit  us  to  discuss 
at  length  the  faults  of  our  patent  system.  The  impor- 
tant point  for  us  to  notice  is  that  the  patent  system  estab- 


GOVERNMENT  MONOPOLIES.  9! 

lishes  certain  monopolies,  and  that  these  monopolies  are 
not  always  harmless.  Patents  are  given  to  "  promote  the 
useful  arts,"  but  the  inventor  whom  they  are  supposed  to 
encourage  reaps  but  a  small  share  of  the  profits  of  his 
inventions.  Valuable  improvements  soon  fall  into  the 
hands  of  large  companies,  who  are  able  to  defend 
them  in  the  courts,  and  reap  all  possible  profits  by 
their  use. 

Again,  patents  sometimes  aid  in  the  formation  of 
trusts  and  combinations.  Two  or  three  firms  may  con- 
trol all  the  valuable  patents  in  connection  with  some 
important  industry.  If  they  agree  to  combine  their 
interests  and  work  in  harmony,  they  are  far  stronger 
than  an  ordinary  trust,  because  the  patents  they  hold 
prevent  outside  competition.  It  was  pointed  out  in  the 
opening  chapter  how  the  control  of  patents  was  some- 
times a  feature  helping  to  induce  the  formation  of  trusts. 
The  Standard  Oil  Trust  had  its  origin  in  the  superiority 
which  one  firm  gained  over  its  competitors  through  the 
control  of  an  important  patent.  The  envelope  trust, 
which,  at  this  date,  has  raised  the  price  of  envelopes  about 
twenty  per  cent,  owes  its  chief  strength  to  its  control  of 
patents  on  the  machines  for  making  the  envelopes.  In- 
stances innumerable  could  be  given  where  a  few  manu- 
facturers, who  by  their  ownership  of  patents  controlled 
the  whole  field,  have  ended  a  fierce  competition  by  con- 
solidating or  agreeing  to  work  together  harmoniously  in 
the  matter  of  selling-prices.  Very  many  of  these  are 
monopolies  in  trade  or  monopolies  in  manufacturing,  and 
as  such  have  already  been  considered  in  the  preceding 
chapters  ;  but  it  is  proper  here  to  point  out  the  part 
which  our  patent  system  has  taken  in  their  formation, 
and  the  fact  that  it  is  due  to  their  control  of  patents  that 


92  MONOPOLIES  AND  THE  PEOPLE. 

many  of  the  existing  combinations  owe  their  security 
against  outside  competition. 

Probably  the  public  was  never  so  forcibly  reminded 
of  the  defects  of  our  patent  system  by  any  other  means 
as  it  has  been  by  the  operation  of  the  Bell  Telephone 
monopoly.  The  purpose  in  granting  patents  is  to  aid  in 
the  establishment  of  new  lines  of  industrial  activity,  se- 
cure to  the  inventor  the  right  to  reap  a  reward  for  his 
work,  and  encourage  other  inventors  to  persevere  in  their 
search  for  new  improvements.  All  these  things  are  ef- 
fected by  the  monopoly  which  is  held  by  the  Bell  Tele- 
phone Company  ;  but  they  are  effected  at  a  cost  to  the 
users  of  the  telephone  under  which  they  have  grown 
very  restive.  Passing  by  the  statement  that  the  patents 
which  the  Bell  company  holds  were  illegally  procured  in 
the  first  place,  through  the  inventor  having  had  access  to 
the  secret  records  in  the  Patent  Office  of  other  inven- 
tions for  which  a  patent  had  been  asked  at  about  the 
same  time  as  his  own,  it  is  an  undisputed  fact  that  the 
Bell  company  holds  the  monopoly  of  communication  by 
electric  telephone  in  this  country.  They  have  managed 
this  monopoly  with  great  skill.  While  the  instrument 
was  yet  in  its  introductory  stage,  and  when  every  smart 
town  felt  obliged  to  start  a  telephone  exchange  or  fall 
behind  the  times,  prices  were  kept  low  ;  but  when  once 
the  telephone  became  a  business  necessity  and  its  ben- 
efits were  well  known,  rates  of  rental  were  advanced  to 
the  point  where  the  greatest  possible  profits  would  accrue 
to  the  Bell  company's  stockholders.  This  was  excellent 
generalship.  The  same  principle  is  applied  in  many 
other  lines  of  business  ;  and  it  was  only  because  the 
company  held  a  monopoly  of  a  most  valuable  industry, 
that  it  proved  so  immensely  profitable  here.  But  other 


GOVERNMENT  MONOPOLIES.  93 

acts  of  the  company,  it  is  alleged,  while  within  the  letter 
of  the  law,  are  yet  clearly  infringements  on  the  just 
rights  of  the  public.  It  is  charged  that  the  company 
has  purposely  refrained  from  putting  into  practical  use 
any  of  the  many  improvements  which  have  been  made  in 
the  telephone  during  the  past  few  years,  but  at  the  same 
time  has  quietly  secured  their  control.  By  skilfully 
managing  "  interferences  "  of  one  patent  against  another, 
and  by  amending  and  altering  the  various  specifications, 
it  contrives  to  delay  as  long  as  possible  the  issue  of  the 
patents  upon  these  inventions.  By  means  of  these  im- 
provements, which  it  purposes  to  introduce  as  its  present 
patents  expire,  it  proposes  to  continue  its  monopoly  for 
many  years  to  come.  It  is  very  likely  that  this  attempt 
will  succeed. 

We  have  already  seen  the  folly  of  establishing  com- 
peting electric  light  companies,  and  the  attempt  to  estab- 
lish rival  telephone  exchanges  is  just  as  sure  to  result 
ultimately  in  a  heavy  additional  tax  on  the  public. 
Then,  too,  the  monopoly  has  grown  so  wealthy  and  pow- 
erful through  its  enormous  profits  that  it  will  be  very 
loth  to  release  its  hold,  even  when  it  is  no  longer  pro- 
tected by  patents.  Rival  companies  which  may  be  es- 
tablished then,  it  will  seek  to  crush  by  a  fierce  competi- 
tion ;  and  it  will  be  quite  likely  to  succeed.  But  in  so 
far  as  it  is  not  protected  by  patents,  it  is  properly  to  be 
considered  with  other  municipal  monopolies,  in  which 
class  we  have  already  referred  to  it. 

The  course  pursued  by  the  Bell  Telephone  Company 
has  at  least  proved  that  our  whole  patent  system  de- 
mands a  thorough  and  radical  revision.  The  inventor 
should  certainly  be  protected,  but  not  to  the  public  hurt. 

The  second  class  of  monopolies  which  the  government 


94  MONOPOLIES  AND  THE  PEOPLE. 

establishes  or  aids  in  establishing  because  it  is  deemed 
to  be  for  the  public  welfare  that  they  exist,  are,  first, 
those  private  industries  which  receive  aid  from  the  gov- 
ernment, either  directly  by  subsidies  or  indirectly  by  the 
taxation  of  the  goods  of  foreign  competitors  ;  and  sec- 
ond, those  branches  of  industry  which  are  carried  on 
by  the  government  itself. 

The  question  concerning  the  granting  of  subsidies 
is  principally  a  past  issue.  A  century  ago  many  new 
enterprises  in  all  lines  of  industry  looked  to  the  govern- 
ment for  aid.  In  those  days,  when  capital  was  scarce 
and  when  investors  hesitated  at  risk,  it  was  perhaps  wise 
to  grant  the  help  of  the  public  treasury  to  aid  the  estab- 
lishment of  young  industries  ;  but  nowadays,  when 
millions  of  capital  are  ready  to  seize  every  opportunity 
for  profitable  investment,  it  is  recognized  that  subsidies 
by  the  general  government  are  no  longer  needed.  The 
days  of  subsidy  granting  ended  none  too  soon.  The 
people  of  the  United  States  gave  away  millions  of  acres 
of  their  fertile  lands  and  other  millions  of  hard-earned 
dollars  to  aid  in  the  building  of  the  railroad  lines  of  the 
West  ;  and  a  great  part  of  the  wealth  thus  lavished  has 
been  gathered  into  the  coffers  of  a  few  dozen  men.  The 
monopolies  created  by  these  subsidies  have  been  largely 
shorn  of  their  power  ;  but  while  they  reigned  supreme, 
their  profits  were  gathered  with  no  halting  hand. 

There  is  only  one  direction  in  which  we  still  hear  the 
granting  of  subsidies  by  the  general  government  strongly 
advocated  ;  that  is  in  the  direction  of  establishing  steam- 
ship lines  to  foreign  ports.  It  would  be  apart  from  the 
scope  of  our  subject  to  discuss  the  wisdom  or  folly  of 
such  a  proceeding  farther  than  to  note  the  fact  that  it 
establishes  a  monopoly. 


GOVERNMENT  MONOPOLIES.  95 

Take,  let  us  say,  the  case  of  a  steamer  line  between 
New  York  and  Buenos  Ayres.  It  is  plain  in  the  first 
place  that  the  government  aid  will  only  be  granted  if 
'there  is  not  business  enough  to  induce  private  parties 
to  take  up  the  enterprise.  But  as  we  suppose  that  there 
was  not  business  enough  in  the  first  place  to  support  one 
steamer  line  unaided,  it  is  certain  that  none  will  under- 
take to  establish  a  rival  line  to  compete  with  that  already 
sure  of  profits  by  reason  of  the  government  aid.  Hence 
this  line  will  have  a  monopoly  of  the  trade  ;  and  unless 
some  proper  restrictions  as  to  rates  accompany  the  sub- 
sidy, the  monopoly  may  lay  an  extortionate  tax  on  the 
public  who  patronize  it. 

The  relation  of  the  tariff  to  monopolies  is  one  which 
deserves  the  careful  attention  of  every  thinking  man. 
Let  us,  in  discussing  this  question,  lay  aside  all  prejudice 
and  preconceived  ideas  for  or  against  the  protective  tariff 
system  and  consider  candidly  what  are  the  actual  facts  of 
the  case.  It  is  evident,  in  the  first  place,  that  the  pur- 
pose of  the  tariff  tax  which  the  government  levies  on 
goods  imported  from  abroad  is  to  keep  out  foreign  competi- 
tion from  our  markets.  The  imported  goods  cost  more 
by  the  amount  of  the  tariff  than  they  otherwise  would  ; 
and  the  American  producer,  if  he  makes  equally  desira- 
ble goods  and  does  not  raise  his  selling  price  above  that 
at  which  imported  goods  can  be  bought,  is  secure  against 
foreign  competition.  But  we  have  already  learned  that 
monopoly  is  simply  the  absence  of  competition ;  and 
inasmuch  as  the  tariff  checks  or  shuts  out  foreign  com- 
petition, it  has  a  tendency  toward  the  establishment  of 
monopoly.  But  this  tendency  may  not  result  in  the 
establishment  of  any  monopoly.  There  is  a  tariff  on 
potatoes,  but  there  is  no  monopoly  in  their  production. 


g6  MONOPOLIES  AND  THE  PEOPLE. 

Evidently  the  tariff  cannot  create  a  monopoly  ;  it  only 
makes  its  establishment  more  easy  by  narrowing  the  field 
of  competition  to  the  producers  of  this  single  country.  If 
we  turn  back  over  the  list  of  monopolies  we  have  studied, 
to  find  those  which  the  tariff  has  any  effect  in  aiding  to 
establish,  we  shall  find  none  till  we  reach  the  first  two 
chapters.  The  monopolies  in  mineral  products  and 
manufactured  goods,  known  generally  by  the  name  of 
trusts,  it  is  self-evident  are  largely  dependent  upon  the 
tariff.  If  they  raise  their  price  above  a  certain  point, 
people  will  buy  goods  of  foreign  production  instead. 
This  point — the  price  at  which  foreign  goods  can  be 
profitably  sold — depends  on  the  rate  of  the  tariff,  on 
the  cost  of  production  in  foreign  countries,  and  the  cost 
of  their  carriage  here. 

Of  the  various  trusts,  it  is  evident  that  only  those  would 
be  effected  by  the  removal  or  reduction  of  the  tariff  whose 
products  are  now  covered  by  it.  Thus  the  Standard  Oil 
Trust  and  the  Cotton-Seed  Oil  Trust  would  not  be  in- 
jured by  any  reduction  in  the  tariff.  As  a  matter  of  fact, 
however,  nearly  all  of  the  trusts  have  to  do  with  manufac- 
tured goods  which  are  covered  by  the  tariff,  and  the  two 
exceptions  already  named  are  about  the  only  ones. 

The  trusts  in  manufactured  products,  broadly  speak- 
ing, then,  are  all  dependent  on  the  tariff.  Here  is  a 
strange  condition  of  affairs.  In  the  early  history  of  this 
nation,  the  people  of  this  country,  represented  by  their 
popular  government,  were  appealed  to  by  the  men  en- 
gaged in  manufacturing  after  this  fashion  :  "  We  cannot 
make  the  things  you  need  as  cheaply  as  the  manufactur- 
ers in  foreign  countries.  They  are  wealthy  and  we  are 
poor.  They  have  their  mills  already  in  operation,  we 
have  ours  to  build.  The  capital  we  borrow  bears  a  rate 


GOVERNMENT  MONOPOLIES.  97 

of  interest  double  that  which  the  foreign  mill-owner  has 
to  pay.  The  labor  we  must  employ  is  not  yet  trained  as 
is  theirs,  and  it  must  receive  far  higher  wages.  There- 
fore we  ask  that  you  aid  us  in  establishing  our  industries 
by  paying  us  higher  prices  for  our  goods  than  those  for 
which  you  could  purchase  the  same  goods  of  foreign 
manufacture.  In  order  that  every  one  shall  be  obliged 
to  do  this,  and  that  all  may  contribute  equally  to  our 
support,  we  ask  you  to  pass  laws  laying  a  tax  on  all  im- 
ported goods  which  compete  with  ours,  whereby  none 
shall  be  able  to  buy  them  at  a  cheaper  price  than  we  can 
afford  to  sell  our  own  goods." 

And  the  people  replied  :  "  While  we  recognize  the  fact 
that  we  must  pay  an  increased  price  for  your  goods  com- 
pared with  that  which  is  asked  for  goods  from  foreign 
mills,  and  are  thus  taxing  ourselves  for  your  benefit,  yet 
we  see  how  desirable  it  is  that  our  industries  should  be 
diversified  and  that  we  should  not  be  dependent  on  for- 
eign nations  for  the  necessaries  and  comforts  of  life. 
Thus  for  a  season  we  will  grant  your  petition  and  tax 
ourselves  to  establish  you  in  your  business." 

Such  was  the  spirit  of  the  movement  that  inaugurated 
the  protective  tariff.  One  other  great  argument  for  its 
establishment,  which  was  believed  by  the  people  and 
was  assented  to  by  the  manufacturers,  was  as  follows  : 
"Our  natural  advantages  for  engaging  in  manufacturing 
are  beyond  those  of  any  other  nation.  Our  workmen 
are  more  skillful,  intelligent,  and  ingenious  ;  our  capital- 
ists are  more  enterprising.  At  the  same  time  there  are 
many  difficulties  to  be  overcome  in  establishing  a  manu- 
facturing business  in  a  new  country.  Some  assistance  is 
needed  at  the  outset  to  tide  it  past  the  critical  period. 
Now,  if  we  can  give  our  manufacturers  a  start  and  enable 


98  MONOPOLIES  AND   THE   PEOPLE. 

them  to  establish  themselves,  they  will  improve  all  these 
natural  advantages  which  we  possess ;  and  with  the 
abundance  of  raw  material  in  our  mines  and  farms  and 
forests,  with  our  ingenuity  and  Yankee  enterprise  and 
skill,  who  can  doubt  that  our  manufacturers,  once  es- 
tablished, can  produce  goods  more  cheaply  than  they 
could  ever  be  brought  across  from  foreign  countries  ? 
This  protection  from  foreign  competition  will  be  a  great 
incentive  to  the  establishment  of  manufacturing  enter- 
prises. Everywhere  mills  and  factories  will  spring  up  ; 
a  brisk  home  competition  will  be  created  ;  and  that  will 
finally  reduce  prices  lower  than  they  could  ever  go  if  we 
remained  dependent  on  foreign  countries  for  our  manu- 
factured goods." 

It  was  a  wise  and  well-founded  plan,  and  only  as  to 
its  final  result  did  it  fail.  The  protective  tariff  did  make 
manufacturing  more  profitable  than  any  other  business, 
and  mills  and  factories  of  every  sort  have  sprung  up  in 
all  parts  of  the  country.  But  the  expected  extreme  com- 
petition which  was  to  reduce  manufacturers'  profits  and 
the  price  of  manufactured  goods  to  a  basis  in  accordance 
with  the  profits  in  agricultural  and  other  branches  of  in- 
dustry has  been  long  delayed.  The  wonderful  develop- 
ment of  the  country  has  kept  up  prices  and  profits,  and 
has  furnished  a  market  for  our  manufacturers  which  has 
long  kept  in  advance  of  their  capacity  to  supply  it.  At 
last,  however,  the  result  which  was  expected  by  the 
founders  of  the  protective  tariff  has  come  to  pass.  Our 
domestic  mills  and  factories  have  a  capacity  beyond  the 
present  demand  for  their  products.  The  home  compe- 
tition which  was  predicted  has  come  ;  and  if  it  had 
operated  to  reduce  prices  as  was  expected,  there  would 
now  be  employment  for  all  our  mills,  for  it  is  an  axiom 
that  every  reduction  in  price  increases  the  demand. 


GOVERNMENT  MONOPOLIES.  99 

But  the  manufacturers  who  had  been  making  enormous 
profits  of  ten,  twenty,  and  thirty  per  cent,  on  their  capi- 
tal for  these  many  years,  were  far  from  willing  to  accept 
calmly  the  situation  and  reduce  their  profits  to  a  reason- 
able figure.  They  have  tried  combinations  of  many 
sorts  to  keep  up  prices,  and  at  last  have  found  in  the 
trust  a  strong  and  effective  means  of  killing  home  com- 
petition and  keeping  up  their  profits,  if  they  choose,  to 
the  highest  point  which  the  tariff  permits. 

It  is  not  to  be  argued  that  the  manufacturers  were 
especially  worse  than  the  general  run  of  men  in  taking 
this  action.  It  is  the  most  natural  thing  in  the  world  that 
a  man  who  has  all  his  life  been  used  to  making  enormous 
profits  in  his  business  should  come  to  think  that  he  had  an 
inalienable  right  to  make  them  ;  and  that  when  competi- 
tion became  so  sharp  that  he  had  to  lower  his  prices,  it 
was  due  to  an  unnatural  condition  of  affairs  glibly  desig- 
nated as  "over-production,"  for  which  the  trust  was  an 
appropriate  and  wise  remedy. 

It  is  thus  plain  how,  in  a  secondary  way,  the  tariff  is  a 
cause  of  the  trusts.  The  fat  profits  which  the  former 
gave  have  made  men  covetous  enough  to  engage  in  the 
latter. 

We  are,  perhaps,  not  yet  prepared  to  discuss  the  ques- 
tion of  the  proper  remedies  for  trusts  ;  but  it  is  too  obvi- 
ous to  call  for  comment  that  an  easy  and  most  effective 
remedy  is  to  cut  away  the  protection  from  foreign  com- 
petition, under  which  they  flourish,  and  let  them  sink  or 
swim  as  they  best  can.  At  the  least  it  will  be  wise  to 
reduce  their  protection  to  a  point  where  any  attempt  to 
tax  the  nation  of  consumers  and  reap  exorbitant  profits 
by  putting  up  prices  so  that  profits  of  twenty-five  per 
cent,  or  more  can  be  reaped,  will  be  counteracted  by  for- 
eign competition. 


IOO  MONOPOLIES  AND  THE  PEOPLE. 

It  is  only  fair  to  point  out  at  the  same  time  that  this 
remedy  is  far  from  being  a  panacea  against  all  trusts  and 
monopolies.  The  monopolies  in  the  peculiar  products 
of  this  country  will  be  unaffected  by  it,  and  the  combi- 
nations which  embrace  the  whole  globe  in  their  plan  of 
operations  are  quite  beyond  its  power.  The  copper 
syndicate  and  the  salt  trust,  and  according  to  Mr.  Car- 
negie a  steel  rail  trust,  are  the  only  actual  examples  of 
international  combinations  which  have  ever  been  at- 
tempted, and  it  will  probably  be  many  years  yet  before 
the  constant  movement  towards  Tennyson's  "  Federation 
of  the  World  "  permits  the  general  formation  of  effective 
industrial  combinations  which  shall  embrace  all  com- 
mercial nations. 

We  have  finally  to  consider  the  monopolies  carried  on 
•directly  by  the  government.  The  carriage  of  the  mails  is 
the  most  important  monopoly  carried  on  by  the  govern- 
ment, and  we  may  find  some  facts  of  interest  by  enquiring 
the  reasons  why  it  is  for  the  public  welfare  that  it  should 
be  so  conducted  rather  than  by  private  enterprise.  In  the 
first  place,  if  it  were  left  to  private  enterprise  to  furnish 
us  with  postal  facilities,  the  postal  service  would  be 
much  more  limited  than  now  ;  many  places  of  small  im- 
portance being  left  without  postal  facilities  or  charged  a 
much  higher  rate  for  service  than  now.  On  the  other 
hand — and  this  is  an  important  point — there  would,  per- 
haps, be  in  and  between  the  large  cities  competition 
between  different  companies  ;  in  which  case  there  would 
be  duplicate  sets  of  postal  facilities,  including  buildings, 
mail-boxes,  furniture,  and  employees  of  every  grade.  It 
is  plain  that  all  this  would  be  a  waste.  One  set  of  facili- 
ties is  better  for  the  public  than  two  or  three  or  more, 
and  is  ample  to  carry  all  the  mails.  To  put  another  set 
.of  men  at  the  work  that  others  are  already  able  to  do,  is 


GOVERNMENT  MONOPOLIES.  IOL 

to  waste  just  so  much  of  the  working  force  of  the  world, 
as  well  as  the  capital  necessary  to  furnish  tools  and 
buildings  for  its  use.  The  matter  of  rates,  too,  would 
vary  with  the  competition.  One  could  never  be  sure 
what  his  postage  bill  for  the  coming  year  was  to  be. 
The  receipts  of  the  companies  would  be  uncertain,  and 
they  would  be  obliged  to  pay  a  high  rate  of  interest  on 
the  capital  invested  in  their  plant,  thus  making  it  neces- 
sary for  them  to  charge  high  rates  for  their  service. 
The  intense  competition  between  rival  companies  would 
lead  to  the  bankruptcy  of  the  weaker,  and  the  final  result 
would  be  the  establishment  of  a  single  corporation  in  the 
control  of  the  whole  system.  Rates  would  then  be  put 
up  to  the  point  where  the  greatest  profit  would  accrue  to 
the  corporation. 

Under  the  existing  system,  then,  we  save  in  cost  of 
service  over  competing  systems  under  private  direction, 
in  that  the  existing  facilities  are  all  made  use  of.  There 
is  no  waste  by  setting  two  men  to  do  the  work  of  one,  or 
by  renting  two  offices  to  do  the  business  which  one  could 
accommodate,  neither  is  any  energy  wasted  in  soliciting 
business.  The  capital  invested  by  the  government  in  its 
plant  for  carrying  on  the  postal  service  would  bear  in- 
terest, if  the  money  were  borrowed,  of  not  more  than 
two  or  three  per  cent.  But  if  a  private  company  bor- 
rowed money  to  carry  a  similar  business,  they  would  have 
to  pay  five  to  seven  per  cent.,  which  they  would  have 
to  make  up  for  by  charging  a  higher  rate  of  postage. 

Other  monopolies  which  have  been  carried  on  by  the 
government  are  the  business  of  transportation,  and  the 
provision  of  roads,  bridges,  and  canals  therefor  ;  monop- 
olies in  mining  ;  and  in  the  case  of  municipal  govern- 
ments, as  already  noted,  the  supply  of  water,  gas,  and 
elect rir  service,  and  street  railway  transportation. 


VIII. 
MONOPOLIES   IN   THE   LABOR   MARKET. 

IT  should  be  said  at  the  outset  of  this  chapter  that,  in 
a  very  true  sense,  practically  all  men  are  laborers.  That 
into  which  a  man  puts  his  energy  and  by  which  he  earns 
his  living,  is  his  labor,  whether  it  be  work  of  the  hand  or 
the  head.  But  the  labor  we  are  to  consider  in  this  chapter 
is  that  of  the  men  who  work  for  wages  ;  and  we  will  also 
make  the  arbitrary  distinction  that  it  is  that  of  the  men 
who  work  for  wages  in  some  branch  of  manufacturing, 
mining,  trade,  or  transportation,  the  great  divisions  of 
modern  industry  which  we  have  thus  far  considered. 

Almost  all  these  monopolies  employ  large  amounts  of 
capital  in  carrying  on  their  business  ;  and  in  the  popular 
speech,  "  monopolist  "  and  "  capitalist  "  are  often  used 
interchangeably.  It  is  a  very  common  belief  that  mo- 
nopolies are  confined  to  the  capitalized  industries  of 
production,  transportation,  and  trade,  which  we  have 
already  considered ;  but  we  are  now  confronted  by  the 
fact  that  the  wage-workers  in  the  various  trades  of  the 
country  are  engaged  in  exactly  the  same  monopolistic 
schemes,  in  which  they  have  exactly  the  same  ends  in 
view  as  have  the  monopolists  who  combine  millions  of 
dollars'  worth  of  capital  to  effect  their  purposes.  On  the 
one  hand  we  have  the  Standard  Oil  Trust  and  the  Rail- 


MONOPOLIES  IN  THE  LABOR  MARKET.      1 03 

road  pools  and  the  hundreds  of  other  capitalistic  com- 
binations striving  to  benefit  the  producer  at  the  expense 
of  the  consumer  ;  while  among  those  whose  only  capital 
is  their  strength  and  skill,  we  find  the  workers  in  all  the 
various  trades,  and  even  some  of  the  lower  grades  of 
laborers  firmly  banded  together  with  the  avowed  purpose 
of  raising  their  wages  above  those  which  they  would  re- 
ceive if  competition  alone  determined  the  rate.  And 
they  are  successful,  too.  Notwithstanding  the  fact  that 
they  deal  with  tens  of  thousands  of  producing  units 
where  the  combiner  of  capitalized  interests  deals  with 
tens,  the  success  achieved  by  the  combinations  of  labor 
is  quite  comparable  with  that  reached  by  combinations 
of  capital.  It  speaks  volumes  for  the  intelligence  and 
ability  of  the  wage-workers  of  the  present  day— yes,  and 
for  the  growth  of  the  spirit  of  fraternity  ;  that  in  the 
advancement  of  what  they  deem  a  just  and  righteous 
cause,  they  should  voluntarily  put  themselves  under  dis- 
cipline and  endure  patiently  the  untold  hardships  of 
uncounted  strikes,  often  brought  on  in  the  unselfish  work 
of  aiding  their  brother  laborers  against  what  they  deem 
a  common  enemy. 

The  modes  in  which  the  combinations  of  skilled  labor- 
ers attain  their  desired  ends  are  akin  to  those  which  ob- 
tain in  a  well  organized  manufacturers'  trust.  The  for- 
mer allow  only  a  certain  number  of  apprentices  to  learn 
their  trade.  The  latter  permit  the  establishment  of 
only  such  additional  mills  as  shall  not  unduly  increase 
the  market  supply.  The  former  fix  a  standard  scale  of 
wages  below  which  no  member  of  the  union  shall  work  ; 
the  latter  fix  a  minimum  price  for  the  goods  sold  in  the 
market.  If  there  are  more  laborers  in  the  union  than 
can  be  employed  at  the  advanced  rate  of  wages,  some 


104  MONOPOLIES  AND  THE  PEOPLE. 

must  be  idle.  If  there  are  more  mills  in  the  trust  than 
the  lessened  demand  for  the  goods  will  keep  busy,  some 
must  be  shut  down.  The  trade-union  boycotts  compet- 
ing workmen  outside  its  ranks,  and  stigmatizes  them  as 
"  scabs."  The  trusts  endeavor  to  punish  every  outside 
manufacturer,  sometimes  by  forcing  upon  him  such  a 
competition  as  shall  cause  his  ruin  ;  sometimes  by  means 
as  illegal  and  criminal  as  are  the  riotous  acts  of  a  mob 
of  hungry  workmen,  and  far  less  defensible.  But  let  us 
not  yet  bring  up  the  question  of  relative  blame.  The 
main  point  which  must  impress  every  candid  observer  is 
that  the  means  employed  for  the  monopolies  of  capital 
and  the  monopolies  of  labor  are  identical  in  principle  and 
motive.  Nor  are  we  confined  to  manufacturers'  trusts 
to  show  that  the  spirit  of  rule  or  ruin  characterizes  capi- 
tal as  well  as  labor.  Railroad  monopolies,  in  the  words 
of  the  president  of  one  of  the  greatest  corporations  of 
the  country,  "  strive  eagerly  to  protect  themselves  while 
entirely  indifferent  as  to  what  shall  befall  their  rivals." 
How  many  weak  corporations  have  been  deliberately 
ruined  by  the  cut  rates  of  stronger  competitors  ?  If  the 
laborer  has  "  scab  "  in  his  vocabulary,  has  not  the  rail- 
road manager  his  "  scalper  "  and  guerilla  "  ? 

The  close  relationship,  viewed  in  many  different  aspects, 
of  the  monopolies  of  labor  and  the  monopolies  in  produc- 
tion generally  has  hardly  received  the  notice  its  import- 
ance deserves.  Still,  it  is  an  evidence  that  people  are 
thinking  of  and  discussing  the  matter  when  such  a  writer 
as  W.  D.  Howells,  who  is  popularly  supposed  to  cater  to 
the  tastes  of  those  who  have  very  little  in  common  with 
the  laboring  classes,  puts  into  the  mouth  of  one  of  his 
characters  a  defence  of  workingmen  for  executing  a  boy- 
cott on  a  non-union  workingman,  on  the  ground  that  they 


MONOPOLIES  IN  THE  LABOR  MARKET.      1 05 

"  did  only  once  just  what  the  big  manufacturing  trusts  do 
every  day." 

Perhaps  it  was  never  so  forcibly  realized  how  thor- 
oughly effective  these  labor  combinations  have  become, 
and  how  completely  they  hold  the  country  at  their  mercy, 
as  in  the  strike  of  the  locomotive  engineers  on  the  Chicago. 
Burlington  and  Quincy  Railroad  system  in  March,  1888, 
Here  were,  perhaps  two  thirds  of  the  men  in  the  country 
qualified  for  the  responsible  and  onerous  work  of  run- 
ning a  locomotive  engine,  firmly  banded  together  to 
advance  their  own  interests  and  secure  assent  to  their 
demands.  Granted  the  will,  the  courage,  the  discipline, 
and  it  was  possible,  yes,  easy,  for  them  to  have  obliged 
the  railroads  to  raise  the  wages  of  every  engineer  in  the 
brotherhood  to  $10.00  per  day,  for  on  a  refusal  they 
could  have  enforced  the  extreme  penalty  of  bringing 
down  a  total  paralysis  upon  the  business  of  the  coun- 
try. It  speaks  volumes  for  the  good  sense,  the  honesty 
and  moderation  of  the  men  and  their  leaders,  that,  not- 
withstanding the  fact  that  their  demands  were  not  im- 
moderate, and  that  the  failure  which  came  permanently 
deprived  of  a  remunerative  position  a  thousand  members 
of  their  brotherhood,  they  refrained  from  the  extreme  to 
which  they  might  easily  have  gone,  and  permitted  them- 
selves to  be  defeated,  when  they  had  the  power  to  have 
forced  a  different  result. 

Organized  workers  in  many  trades  have  the  power  to 
force  wages  much  higher  than  they  have  done.  Would 
that  the  Sugar  Refineries  Company,  and  some  other  mon- 
opolies of  production,  were  as  moderate  in  their  demands 
upon  the  public  as  are  the  workingmen.  But  though 
their  demands  are  in  one  sense  moderate,  it  is  yet  true 
that  in  so  far  as  they  exceed  the  amount  which  the 


106  MONOPOLIES  AND  THE  PEOPLE. 

laborer  would  receive  when  the  market  for  labor  is  open 
to  free  competition,  they  are  the  direct  result  of  the  arti- 
ficial monopoly  which  the  laborers  have  created  by  their 
combination,  and,  in  effect,  levy  a  tax  upon  the  com- 
munity. To  illustrate  :  let  us  suppose  that  if  every  man 
were  permitted  to  follow  the  trade  of  bricklaying  who 
wished  to  do  so,  the  equilibrium  between  supply  and  de- 
mand would  be  found  at  a  rate  of  wages  of  $3.00  per  day. 
At  that  rate,  if  the  price  rose,  more  men  would  wish  to 
follow  the  trade  and  at  the  same  time  fewer  people  could 
afford  to  build  houses,  thus  raising  the  supply  above  the 
demand.  If  the  price  fell,  some  of  the  men  would  pre- 
fer to  work  at  some  other  trade  and  more  people  would 
conclude  they  could  afford  to  build  houses.  But  when 
the  rate,  which,  without  prejudice,  we  call  the  natural 
rate,  is  at  $3.00  per  day,  suppose  the  men  belonging  to 
the  trade  form  a  union  and  resolve  to  charge  $5.00  a  day 
for  their  work.  Then  it  is  very  evident  that  the  cost  of 
building  is  increased,  and  every  one  has  to  pay  more  for 
construction  and  ask  a  higher  rent  to  repay  himself  af- 
terward. Evidently,  then,  by  this  action  of  the  bricklay- 
ers every  man  in  the  trade  receives  $2.00  more  per  day 
for  each  day's  work,  which  must  be  paid,  directly  by  their 
employers,  but  indirectly  by  the  whole  community.  It 
would  be  easy  to  prove  that  the  tax  on  the  community 
when  the  wages  are  raised  in  any  trade,  affects  the  whole 
public  as  well  as  those  directly  employing  the  workers  in 
that  trade  ;  but  it  seems  too  plain  to  require  proof. 
The  main  point  we  now  wish  to  show,  is  that  any  in- 
crease in  the  wages  of  labor  over  that  received  under 
ordinary  competition  must  be  paid  by  the  community, 
just  as  much  as  any  increase  in  the  price  of  coal,  iron, 
copper,  wood,  wheat,  or  any  other  commodity  must  be 


MONOPOLIES  IN  THE  LABOR  MARKET.      IO/ 

paid  by  consumers  at  large.  Nor  does  the  injury  to  the 
community  stop  here,  by  any  means.  We  saw  that  the 
advance  of  prices  by  the  linseed  oil  trust  was  an  injury 
to  all  those  who,  on  that  account,  were  obliged  to  forego 
painting  ;  and  that  it  thus  caused  a  further  injury  to 
painters,  paint-makers,  and  even  those  employed  in  the 
building  trade.  But  the  increase  in  the  price  of  the 
bricklayers'  work  has  results  no  less  important.  Not 
only  is  injury  done  to  those  who  build  and  have  to 
pay  more  for  their  buildings,  but  many  are  prevented 
from  building  on  account  of  the  increased  cost.  If  we 
argue  according  to  a  prevalent  method,  we  may  say  that 
this  reduced  activity  in  the  building  trade  will  cause  stag- 
nation among  allied  trades  with  corresponding  loss  of 
employment.  Again,  as  a  less  number  of  houses  are 
built,  and  those  which  are  built  are  more  expensive, 
rents  are  certain  to  rise,  which  means  that  the  poor 
man  must  pay  out  a  still  greater  part  of  his  earnings 
for  his  shelter,  or  else  must  put  up  with  poorer  and 
meaner  quarters. 

It  is  a  strange  thing  to  trace,  in  connection  with  this, 
the  history  of  labor,  and  see  how  recent  it  is  that  the 
natural  right  of  a  man  to  sell  his  services  for  such  a 
price  as  he  could  obtain  has  been  acknowledged.  His- 
tory shows  that  until  modern  times,  compulsory  personal 
servitude  has  been  in  every  age  and  country  the  lot  of  a 
large  part  of  the  human  race.  And  when  wages  began 
to  be  paid  for  service,  conditions  were  not  much  im- 
proved. In  England,  in  the  fourteenth  century,  in  the 
reign  of  Edward  III.,  a  pestilence  seriously  depopulated 
the  country,  and  reduced  the  supply  of  laborers  so  much 
that  it  was  not  equal  to  the  demand  for  labor,  and  wages 
began  to  rise.  Laws  were  therefore  enacted  that  each 


108  MONOPOLIES  AND  THE  PEOPLE. 

able-bodied  man  and  woman  in  the  realm,  not  over  three 
score,  "  not  living  in  merchandise,  nor  exercising  any 
craft,  nor  having  of  his  own  whereof  to  live,  nor  land 
about  whose  tillage  he  might  employ  himself,  nor  serving 
any  other,"  should  be  bound  to  serve  at  the  wages  accus- 
tomed to  be  given  five  years  previously.  No  persons 
were  allowed  to  pay  an  advance  on  these  wages,  on  pain 
of  forfeiting  to  the  Crown  double  what  they  had  paid. 
Previous  to  the  fifteenth  century,  workmen  in  various 
occupations  were  impressed  into  the  service  of  the  king 
at  wages  regardless  of  their  will  as  to  the  terms  and 
place  of  employment.  Indeed,  all  through  the  fifteenth 
and  sixteenth  centuries,  there  were  continual  attempts  to 
fix  the  rate  of  wages  arbitrarily  by  law,  and  also  the  hours 
of  labor.  These,  by  one  old  statute,  were  decreed  to 
last  from  5  A.M.  to  7  or  8  P.M. 

These  acts,  and  others  of  similar  nature,  were  intended 
for  the  subjugation  of  laborers  and  the  benefit  of  the 
employers  of  labor.  It  is  only  since  the  era  of  popular 
government  that  legislation  for  an  opposite  purpose  has 
come  in  vogue.  Gradually  the  right  of  the  workingman 
to  have  the  price  of  his  labor  fixed  as  is  the  price  of 
other  commodities,  by  the  law  of  supply  and  demand, 
came  to  be  recognized,  although  the  progress  was  piti- 
fully slow.  The  old  ideas  of  the  relation  between 
"  master  "  and  "  servant  "  were  very  tenacious  of  life, 
and  the  substitution  of  the  terms  "  workman "  and 
"  employer  "  is  a  change  which  has  taken  place  in  Eng- 
land during  the  present  generation. 

It  was  the  petty  tyranny  and  the  grinding  extortion 
which  the  laborers  had  begun  to  feel,  even  though  they 
were  far  better  paid  and  better  treated  than  their  fathers, 
that  caused  the  formation  of  the  original  trade  unions. 


MONOPOLIES  IN  THE  LABOR  MARKET.       1 09 

Laborers  saw  that  each  was  helpless  alone,  but  that  com- 
bined they  were  a  power  which  their  employers  need  not 
despise.  The  old  craft  guilds  furnished  them  an  exam- 
ple of  effective  combination  among  those  engaged  in  the 
same  trade  ;  and  as  men  everywhere  in  every  age,  when 
a  common  danger  or  misfortune  has  confronted  them, 
have  come  together  for  mutual  help  and  defence,  these 
ignorant  laborers,  in  violation  of  stringent  statutes,  but 
following  blindly  their  human  instincts  of  self-defence, 
came  together  and  organized  the  first  trade  unions. 

The  common  law  has  always  held  trade  unions  to  be 
"  illegal  combinations  in  restraint  of  trade."  Between 
the  reigns  of  Edward  I.  and  George  IV.,  the  common 
law  was  affirmed  and  made  more  effective  by  the  passage 
of  over  thirty  acts  of  Parliament,  all  intended  to  abolish 
the  trade  unions.  In  1800  a  stringent  law  was  passed,  by 
which  all  persons  combining  to  advance  their  wages  or 
decrease  the  quantity  of  their  work,  or  in  any  way  affect 
or  control  those  who  carried  on  the  business  in  which 
they  were  employed,  might  be  committed  to  jail  by  a 
justice  for  not  more  than  three  months,  or  to  work  in 
the  house  of  correction  for  not  more  than  two  months. 
Not  till  1824  was  an  act  passed  slightly  ameliorating  this 
stringent  law,  and  even  then  the  trade  unions  remained 
for  the  most  part  secret  organizations.  At  last,  in  1871 
and  1876,  laws  were  passed  under  which  no  person  can 
be  prosecuted  for  conspiracy  to  commit  an  act  which 
would  not  be  criminal  if  committed  by  him  singly  ;  and 
the  trade  unions,  thus  legalized,  were  taken  in  common 
with  other  benefit  societies  under  the  protection  of  the 
law. 

We  have  already  pointed  out  the  main  fact  that  the 
chief  end  and  aim  of  the  trade  unions  is  the  advance- 


1 10  MONOPOLIES  AND  THE  PEOPLE. 

ment  of  wages  by  securing  a  monopoly  of  the  supply  of 
labor  in  some  particular  trade.  It  is  now  fair  to  explain, 
as  we  have  for  other  monopolies,  the  labor  monopoly 
from  the  standpoint  of  the  laborer  himself 

It  is  a  sound  axiom  of  business  that  a  forced  sale  is 
apt  to  be  an  unprofitable  one  to  the  seller  ;  and  that  when 
a  man's  needs  are  so  great  that  he  is  absolutely  obliged 
to  sell  at  any  price,  he  is  quite  certain  not  to  get  the  full 
worth  of  his  goods.  Now  it  is  an  undeniable  fact  that 
the  condition  of  many  of  the  wage-workers  of  the  coun- 
try approximates  to  this  :  They  must  have  food,  shelter, 
and  clothing  for  themselves  and  their  families,  and  the 
only  thing  they  can  offer  in  exchange  for  it  is  their  labor. 
Suppose  an  honest  and  industrious  man  has  some  mis- 
fortune, as  an  accident,  or  illness,  and  loses  employment. 
When  once  more  able  to  work,  he  finds  his  old  place 
filled  and  new  places  hard  to  find  ;  but  at  last  he  finds  a 
mercenary  employer  who  agrees  to  give  him  half  wages. 
Disheartened  at  his  prospects,  he  thinks  half  a  loaf  is 
better  than  no  bread,  especially  when  those  dearest  to 
him  are  hungry,  and  so  takes  the  place.  But  his  em- 
ployer takes  care  that  his  constant  work  shall  leave  him 
no  time  to  hunt  for  a  better  position.  Indeed,  by  a  few 
judicious  threats  from  his  employer,  the  man  may  be  put 
in  terror  of  losing  the  pittance  he  already  has,  and  see- 
ing those  dependent  on  him  in  absolute  starvation. 
Such  cases  are  amply  provided  for  by  the  trade  union. 

111  treatment  of  any  one  of  its  members  may  be  avenged 
by  the  organization  as  a  whole,  on  the  principle,  whose 
spirit  of  fraternity  and  self-sacrifice  all  must  admire,  that 
"  an  injury  to  one  is  the  concern  of  all."     More  than 
this,  by  means  of  the  benefit  feature  of  the  fraternity, 
the  member  unfortunate,  or  in  distress,  is  properly  cared 


MONOPOLIES  IN  THE  LABOR  MARKET.       Ill 

for.  No  member  is  obliged  to  feel,  when  seeking  for 
employment,  that  his  food  or  shelter  is  at  stake  if  his 
attempts  fail,  and  he  need  never  be  at  the  mercy  of  em- 
ployers who  drive  sharp  bargains. 

It  is  often  charged  as  an  evil  of  trade-unions  interfer- 
ing with  wages,  that  they  tend  to  bring  all  their  members 
to  the  same  level,  and  are  opposed  to  the  payment  of 
wages  in  proportion  to  the  varying  abilities  of  the  men 
working  at  the  same  employment.  But  with  unorganized 
labor,  and  employers  who  were  none  too  just  in  their 
ideas,  it  was  not  uncommon  to  see  the  necessity  of  the 
laborer,  or  his  inability  to  drive  a  good  bargain,  taken 
advantage  of.  Thus  the  workmen  whose  necessities 
were  greatest,  and  who  were  the  most  docile  and  obedi- 
ent, received  lower  wages  than  the  men  who  were  not 
particular  whether  they  were  busy  or  idle,  and  were  in- 
clined to  pay  more  attention  to  their  own  rights  and 
prerogatives  than  to  the  work  for  which  they  were  hired. 
While  the  tendency  toward  non-recognition  of  the  vary- 
ing abilities  and  ambitions  of  workmen  by  the  trade 
unions  must  be  deprecated,  it  has  largely  grown  from  the 
reform  of  this  worse  abuse. 

There  is  another  benefit  which  the  organization  of 
labor  has  effected  which  may,  perhaps,  be  thought  an 
evil  by  some,  but  which  every  broad  and  generous  man 
must  gratefully  recognize  as  a  gain  to  the  whole  com- 
munity ;  and  in  a  self-governed  nation  like  our  own,  it 
is  a  benefit  whose  importance  it  is  difficult  to  over-esti- 
mate. This  is  the  maintenance  of  the  laborer's  dignity 
and  self-respect.  We  have  but  to  look  back  to  the  times 
we  have  already  mentioned,  to  see  the  laborer  hardly  bet- 
ter than  a  dog,  a  cringing  dependent,  kicked  and  beaten 
on  slight  pretext,  and  with  almost  every  vestige  of  man- 


J12  MONOPOLIES  AND  THE  PEOPLE. 

hood  worked  and  bullied  out  of  him.  We  have  come 
upon  far  happier  times  to-day,  and  there  are  few  corners 
of  the  civilized  world  where  conditions  so  evil  prevail 
now.  But  without  the  organization  of  labor,  the  status 
of  workingmen  would  be  much  farther  removed  from 
what  is  just  and  right  than  it  now  is.  Every  employer 
who  is  wise  and  honest,  and  who  has  the  true  spirit  of  a 
gentleman,  will  see  that  his  workmen  are  treated  with 
the  respect  that  is  their  just  due.  Discipline  there  must 
be,  but  it  is  a  wrong  view  of  discipline  that  makes  it  con- 
sist of  oaths  and  brutal  insults  delivered  according  to 
the  prevalent  good  temper  or  ugliness  of  the  overseer. 
Unfortunately,  not  every  man  who  is  placed  in  authority 
is  wise,  honest,  and  a  gentleman.  Bodily  violence  is  no 
longer  permitted  by  law,  but  too  often  the  curses  and  in- 
sults which  are  heaped  on  men  with  no  due  cause  are  a 
violence  which  is  more  severe  to  many  a  man  than  actual 
cuffs  and  kicks.  No  man  can  take  such  treatment  with- 
out resentment,  and  maintain  his  dignity  and  self-respect. 
Yet  in  how  many  places  is  petty  tyranny  of  this  sort  still 
active,  and  its  victims  are  cowed  into  submission  for  fear 
of  taking  the  bread  from  their  children's  mouths. 

But  the  member  of  a  strong  labor  organization  need 
not  be  cowed  or  tamely  accept  insult.  He  has  the  right 
to  resent  it,  and  has  the  power  of  his  fraternity  to  support 
him.  He  knows  this,  and  his  employer  knows  it.  Over- 
seers, big  with  their  importance,  and  inclined  to  show  it 
by  attacking  the  self-respect  of  the  men  under  them  are 
no  longer  in  demand. 

It  is  very  unfortunate  that  many  people  misconstrue 
this  result  of  the  organization  of  labor  as  a  move  toward 
the  abolition  of  all  social  ranks  and  grades.  It  is  nothing 
of  the  kind.  Social  gradations  cannot  be  created  or 


MONOPOLIES  IN  THE   LABOR  MARKET.       I  13 

brushed  away  by  any  legislative  enactment,  or  the  acts 
of  any  single  class.  The  combination  of  the  workmen 
to  secure  their  right  to  protect  themselves  from  insult  is 
indeed  a  movement  toward  making  them  better  and 
nobler  men,  just  as  the  abolition  of  slavery  in  all  its 
forms  was  a  move  in  this  direction.  But  no  man  is  truly 
free  if  he  is  not  secure  in  his  right  to  immunity  from 
personal  insult  as  well  as  from  bodily  violence.  It  is 
not  strange,  however,  that  the  workman,  conscious  of  the 
strength  of  the  fraternity  behind  him,  sometimes  grows 
arrogant  and  insolent  toward  those  who  must  necessarily 
be  in  authority  over  him.  Unaccustomed  for  generations 
past  to  other  government  than  fear  of  one  sort  or  other, 
he  is  all  unused  to  self-control.  But  it  is  hardly  possible 
that  this  should  be  a  great  evil.  The  body  of  workmen 
will,  eventually,  if  not  now,  refuse  to  sanction  and  de- 
fend their  members  in  any  thing  which  their  innate  sense 
of  justice  must  teach  them  is  wrong.  Few  workingmen 
will  causelessly  ask  their  brotherhood  to  undertake  the 
hardships  and  loss  of  prestige  which  accompany  a  strike. 
And  even  when  insolence  is  shown  toward  employers  or 
overseers,  they  have  at  least  equal  power  to  resent  it,  and 
are  not,  as  was  the  laborer  of  a  half-century  ago,  forced 
to  submit  to  insults  with  outward  humility. 

We  have  already  noticed  the  condition  of  the  laws  in 
reference  to  the  laborer  in  former  times  ;  but  the  repeal 
of  the  laws  oppressing  the  workman,  and  making  him  a 
servant  to  a  master  instead  of  a  workman  for  an  employ- 
er, has  been  largely  due  to  the  organized  efforts  of  the 
trade  unions.  To  them,  also,  we  owe  the  passage  of 
many  acts  like  those  for  the  guarding  of  machinery  in 
factories,  the  restrictions  upon  the  employment  of  child 
labor,  and  the  proper  care  for  the  health,  comfort,  and 


114  MONOPOLIES  AND  THE  PEOPLE. 

convenience  of  employes  in  general.  It  cannot  be  said 
that  the  labor  interests  have  always  shown  great  wisdom 
in  all  their  advocacy  of  new  legislation,  and  too  many 
acts,  like  those  in  reference  to  the  employment  of  con- 
vict labor,  show  a  lamentable  retrogression.  On  the 
whole,  however,  there  is  every  reason  to  believe  that  the 
general  course  of  justice  has  been  aided  by  the  influence 
of  the  trade  unions — something  which  can  be  said  of 
very  few  special  interests  for  whose  benefit  our  legisla- 
tures have  enacted  laws. 

All  the  above  facts  we  must  admit  in  defence  of  the 
organizations  which  have,  to  a  large  degree,  killed  com- 
petition in  the  labor  market.  But  in  defence  of  the 
especial  action  of  the  labor  monopolists  in  forcing  wages 
up  to  a  point  above  that  which  competition  alone  would 
determine,  there  is  also  much  to  be  said.  Those  who  are 
unwilling  to  concede  that  there  is  any  justice  in  the  claim 
of  the  wage-workers  that  full  justice  is  not  yet  awarded 
them,  are  accustomed  to  expand  on  the  theme  of  the  im- 
proved condition  of  the  laborer  over  that  in  which  he  was 
a  century  ago.  How  this  can  be  taken  for  argument  is  a 
mystery.  No  one  thinks  of  disputing  or  diminifying  the 
well-known  fact  that  many  workmen  of  to-day  have  more 
comforts  than  the  princes  of  the  Middle  Ages.  The 
single  point  in  dispute  is  this :  Of  the  total  wealth 
which  is  being  produced  in  the  world  to-day,  is  the 
laborer  receiving  his  fair  share  ?  There  are  not  wanting 
men  of  judgment  and  ability  who  answer  this  question 
with  a  decided  No.  And  the  greater  share  of  the  blame 
for  this  injustice  they  lay  upon  the  monopolies  which  we 
have  been  discussing.  They  charge,  and  they  verify 
their  charge  with  ample  and  sound  testimony,  that  of  the 
wealth  which  the  united  brains,  and  strength,  and  skill  of 


MONOPOLIES  IN  THE  LABOR  MARKET.       11$ 

the  world  daily  produces,  the  lion's  share  is  taken  by  men 
who  render  the  world  no  proportionate  service.  This  is 
partly  due  to  existing  laws,  which  the  public  is  not  yet 
wise  enough  to  better  ;  partly  to  the  inertia  of  public 
opinion,  which  is  still  prone  to  cling  in  many  points  to 
the  idea  of  past  generations  that  the  workman  was 
necessarily  a  slave  ;  and  partly  to  the  narrow  selfishness 
and  grasping  ambition  of  many  men  in  the  business 
world.  This  is  not  arguing  for  the  reduction  of  all  to  a 
dead  level,  as  is  so  often  absurdly  claimed.  It  is  arguing 
that  the  inequalities  which  exist  at  the  present  day  are 
not  held  securely  in  place  by  agreement  with  the  in- 
flexible laws  of  justice  and  right.  Instead  they  are 
abrupt  and  uneven,  and  contrary  to  these  laws  ;  and  there 
is  great  danger  that  the  readjustment,  which  must  inevi- 
tably take  place  to  bring  them  in  accord  with  these  laws, 
will  come,  not  as  a  gradual  change,  but  as  a  series  of 
terrible  social  catastrophes,  involving  us  in  a  wreck 
which  will  require  a  century  of  civilization  to  repair. 

Only  fanatics  preach  absolute  equality.  As  men  differ 
in  their  ability  and  their  power  to  serve  the  world,  so  is 
it  just  that  the  reward  which  the  world  metes  out  to 
them  should  differ  in  like  proportion.  But  if  we  stretch 
to  the  utmost  the  benefit  which  we  conceive  the  world  to 
derive  from  the  life  of  many  of  its  men  who  reap  the 
richest  harvest  from  its  production,  we  cannot  in  any 
way  make  out  that  their  services  are  so  valuable  as  to  de- 
serve such  munificent  reward.  Indeed,  it  is  not  very  far 
from  the  truth  to  say  of  some  of  our  most  wealthy  men 
that  their  wealth  was  won  instead  of  earned  ;  and  many 
place  a  much  worse  term  in  the  place  of  "  won." 

The  workman  sums  up  his  case  with  the  argument 
that  as  he  is  confessedly  not  getting  his  just  share  of  the 


Il6  MONOPOLIES  AND   THE  PEOPLE. 

results  of  his  work,  he  is  only  getting  his  due,  or  part  of 
it,  if  by  combination  with  his  fellows  to  crush  out  com- 
petition, he  is  able  to  put  up  the  price  of  his  labor  above 
the  natural  rate.  Finally,  as  a  last  defence  for  the  labor 
monopolies,  he  calls  attention  to  the  trusts  and  pools 
and  monopolies  which  are  taxing  him  at  every  hand  for 
the  necessaries  of  life,  and  declares  that  if  he,  working  on 
the  same  principle  as  the  wealthy  capitalists,  is  able  to 
combine  his  tens  of  thousands  of  fellows  into  an  effective 
monopoly,  surely  he  should  not  be  condemned  for  fol- 
lowing the  example  of  the  men  who  are,  or  are  supposed 
to  be,  his  social,  moral,  and  intellectual  superiors. 

Such  is  the  strong  case  which  the  labor  organizations 
present  in  defence  of  the  unions  which  they  have  formed 
to  kill  competition  in  the  labor  market.  The  investiga- 
tion we  have  pursued  in  the  preceding  chapters  enables 
us  to  add  to  this  a  statement  of  the  case  more  compre- 
hensive and  striking  even,  than  the  narrower  views  which 
have  preceded.  In  the  chapter  on  the  monopolies  in 
trade,  reference  was  made  to  the  fact  that  the  competition 
among  purchasers  tends  to  keep  prices  up,  just  as  com- 
petition among  sellers  tends  to  keep  them  down.  Now 
labor  is  a  commodity  whose  price  in  the  market  is  gov- 
erned by  the  same  laws  of  supply  and  demand  that 
regulate  the  prices  of  all  other  things  that  are  bought 
and  sold.  But  it  has  this  peculiar  difference,  that  the 
sellers  of  labor  are  many,  while  ^^.  purchasers  are  few,  as 
compared  with  the  relative  proportion  of  sellers  and 
buyers  of  goods  in  general.  Then,  wherever  there  is 
little  competition  among  purchasers  of  labor,  we  shall 
expect  to  find  low  wages  ;  and  where  competition  to 
secure  workmen  is  active,  high  wages  will  be  the  rule. 
This  is  so  obviously  true,  in  the  light  of  every  one's 


MONOPOLIES  IN  THE  LABOR   MARKET.       1 1 7 

experience,  that  we  need  not  stop  to  prove  it.  Now,  in 
the  days  when  manufacturing  was  carried  on  in  small 
workshops,  there  was  a  great  number  of  purchasers  of 
labor.  The  concentration  of  manufacturing  in  great 
establishments  where  thousands  of  workmen  are  em- 
ployed has  lessened  the  number  of  employers  greatly  ; 
has  it  not  also  lessened  competition  among  them  ?  It  is 
a  well-known  fact  that  in  many  great  industries,  as,  for 
instance,  the  mining  of  coal  or  the  manufacture  of  iron, 
there  is  one  rate  of  wages  paid  all  through  one  district, 
and  the  employers  fix  that  rate  through  their  associations. 
The  makers  of  trusts  have  sometimes  defended  them,  on 
the  ground  that  they  enabled  the  employer  to  pay  his 
laborers  higher  wages  ;  but  it  is  plain  that  when  all  the 
firms  in  a  trade  are  united  in  one  combination,  there  can 
be  no  competition  between  them  for  the  employment  of 
labor.  They  will  pay  them  only  such  wages  as  they 
choose  ;  and  the  bulk  of  evidence  seems  to  show  that, 
notwithstanding  the  vast  profits  which  the  monopolies 
are  reaping,  they  have  been  far  from  showing  any  general 
disposition  to  share  their  profits  with  their  employes. 
It  seems  almost  unquestionable  that  we  have  here  the 
real  reason  for  the  extraordinary  increase  of  labor  mo- 
nopolies within  the  past  quarter  century.  This  period 
has  witnessed  a  rapid  growth  of  consolidation  and  com- 
bination in  all  our  industries,  lessening  thus  the  number 
of  employers  of  labor.  The  wage-worker  found  himself 
confronted  with  the  fact  that  he  was  soon  to  lose  en- 
tirely the  benefit  of  competition  for  the  purchase  of  his 
work,  and  felt  that  his  only  salvation  from  practical 
slavery  was  to  prevent  the  competition  between  himself 
and  his  comrades  from  forcing  his  wages  down  to  the 
starvation  point.  He  met  the  monopoly  that  threatened 


Il8  MONOPOLIES  AND  THE  PEOPLE. 

to  lower  his  wages  by  forming  another  monopoly  that 
could  meet  the  first  on  equal  terms. 

We  have  given  little  space  in  this  chapter  to  the  con- 
sideration of  the  limit  of  the  power  of  labor  monopolies  ; 
but  it  is  obvious  that  this  is  very  clearly  defined.  In  the 
first  place,  while  there  are  certain  attempts  at  combina- 
tion among  unskilled  laborers,  and  those  not  working  at 
trades,  these  attempts  cannot,  as  a  general  rule,  be  at  all 
successful.  Any  man  out  of  employment  may  be  a  com- 
petitor for  the  work  which  they  do,  and  it  seems  practi- 
cally impossible  that  any  organization  can  combine,  under 
effective  discipline,  even  a  majority  of  the  workingmen  of 
the  country  not  skilled  in  a  trade.  The  only  ways  in 
which  attempts  to  kill  competition  in  unskilled  labor  can 
be  successful,  then,  are  by  the  use  of  force  or  the  boycott, 
or  similar  means,  and  these  can  never  come  into  vogue  as 
permanent  agents  in  the  world's  industry.  The  labor 
monopolies  which  exist,  and  which  promise,  if  let  alone, 
to  enjoy  continued  success,  are  principally  combinations 
of  the  workers  in  skilled  trades,  and  certain  of  those 
employed  in  manufacturing,  mining,  trade,  and  trans- 
portation. 


IX. 


MONOPOLIES     AND     COMPETITION     IN     OTHER 
INDUSTRIES. 

As  we  take  a  look  back  over  the  long  list  of  monop- 
olies which  we  have  investigated  in  the  preceding  chap- 
ters, the  natural  thought  is  that  we  have  considered  now 
the  greater  part  of  the  industries  of  the  country.  Cer- 
tainly these  occupations  of  manufacturing  and  trade  and 
transportation,  are  generally  considered  as  our  important 
industries,  and  a  pretty  good  share  of  our  legislation  and 
public  agitation  concerns  itself  with  the  welfare  of  these 
industries  and  with  the  men  who  are  employed  in  them. 
But  certain  questions  will  naturally  arise  in  the  curious 
mind.  Just  what  proportion  of  our  total  working  popu- 
lation are  employed  in  these  industries  ;  and  of  that 
number  how  many  are  reaping  the  profits  of  the  monop- 
oly ?  What  are  the  remaining  occupations  of  our  peo- 
ple, and  are  the  workers  in  them  doing  any  thing  to 
destroy  competition  ?  To  the  investigation  of  these 
matters  we  will  devote  the  present  chapter. 

The  United  States  Census  Bureau  classes  the  gainful 
occupations  of  the  people  in  four  great  divisions  :  (i) 
Agriculture.  (2)  Professional  and  Personal  Service.  (3) 
Trade  and  Transportation.  (4)  Manufacturing,  Mining, 
and  Mechanical  Industries.  The  monopolies  which  we 

119 


120  MONOPOLIES  AND   THE   PEOPLE. 

have  studied  in  the  preceding  chapters  are  all  included 
in  the  last  two  classes.  The  total  number  of  persons 
engaged  in  trade  and  transportation  in  the  country  in 
1880  is  given  as  1,810,256,  and  the  total  engaged  in 
manufacturing,  mechanical,  and  mining  operations  is 
3,837,112,  or  a  total  of  5,647,368  in  all  these  occupa- 
tions among  which  we  have  found  monopolies  to  exist. 
Of  course  the  great  proportion  of  the  persons  included 
in  the  above  number  have  no  direct  interest  in  the  profits 
of  the  industries  in  whose  operation  they  aid.  It  is,  in- 
deed, argued  that  the  manufacturer,  miner,  or  merchant 
who  is  making  enormous  profits,  pays,  therefore,  larger 
and  more  generous  wages  ;  but  it  is  urged  on  the  other 
side  that  while  this  is  true  in  isolated  cases,  the  general 
rule  holds  good  that  the  price  of  labor  is  governed  by  the 
law  of  supply  and  demand  ;  and  that,  as  already  pointed 
out,  monopoly  among  producers  means  a  monopoly 
among  purchasers  of  labor.  Let  us  now,  however,  leave 
out  this  indirect  benefit  which  may,  or  may  not,  accrue  to 
the  workmen  in  these  various  occupations,  and  find  as 
nearly  as  we  can  the  number  which  are,  or  can  possibly 
be,  directly  benefited  by  the  operation  of  monopolies. 
Let  us  deduct  from  the  total  of  5,647,368,  such  classes  of 
persons  as  it  is  evident  cannot  have  a  direct  share  in  the 
results  of  a  monopoly  and  are  not  engaged  as  skilled 
workmen  in  a  trade  which  has  been  organized  to  control 
competition. 

We  may  certainly  deduct  the  following  items  from  the 
total : 

Agents 18,523 

Clerks,  salesmen,  and  accountants  in  stores 445,513 

Commercial  travellers,  hucksters,  and  peddlers 81,649 

Draymen,  hackmen,  teamsters,  etc 177,586 

Sailors,  steamboat-men,  canal-men,  pilots,  and  watermen.  100,902 


MONOPOLIES  IN  OTHER  INDUSTRIES.        121 

Apprentices 44,i?o 

Blacksmiths 172,726 

Fishermen  and  oystermen 41,352 

Lumbermen,  raftsmen,  and  wood-choppers 43,382 

Photographers 9,99° 

Saw-mill  operatives 77,050 

Tailors,  tailoresses,  milliners,  and  dressmakers 419,157 

Total 1,632,000 

There  are  a  great  many  other  occupations  in  the  list ' 
from  which  these  items  are  taken  which  might  properly 
be  included  in  the  above,  as  the  combination  which  does 
or  can  exist  in  them  it  is  almost  certain  is  of  no  practical 
importance.  On  the  other  hand,  however,  our  total  of 
5,647,368  takes  no  account  of  the  persons  interested  in 
trade,  transportation,  or  manufacturing  through  holding 
the  shares  or  bonds  of  incorporated  companies  ;  also  the 
errors  and  omissions  of  the  census  are  so  great  in  any 
event  that  only  broad  and  general  statements  can  be 
based  upon  them.  Deducting,  then,  from  the  total  of 
5,647,368  the  1,632,000,  which  we  found  to  be  surely  not 
interested  in  monopolies,  we  have  about  four  million 
persons  as  the  utmost  number  who  are  benefited  by  the 
profits  of  the  monopolies  which  we  have  thus  far 
considered.  But  let  us  look  into  this  a  little  farther.  As 
we  have  already  stated,  the  monopolies  of  trade  are  gen- 
erally unable  to  raise  prices  far  above  their  normal  rate. 
In  retail  trade,  especially,  competition  shows  great  ten- 
acity of  life.  Also  with  regard  to  labor  monopolies,  it  is 
true,  as  we  have  already  stated,  that  the  limits  of  their 
operation  are  pretty  closely  defined  ;  even  the  men  in 
the  highest  grades  of  skilled  labor  cannot  secure  for  each 
workman  by  any  combination  more  than  two  or  three 

1  From  the  "Compendium  of  the  Tenth  Census  of  the  United 
States,"  Part  II.,  pp.  1378  and  1384. 


122  MONOPOLIES  AND  THE  PEOPLE. 

dollars  per  day  over  what  he  would  receive  under  the 
freest  competition.  Let  us,  therefore,  deduct  from  the 
preceding  four  millions  the  persons  engaged  in  retail 
trade,  and  all  skilled  laborers  in  the  various  trades  which 
we  formerly  included  because  we  conceived  that  they 
might  be  connected  with  some  form  of  labor  organiza- 
tion, and  might  also  obtain  some  benefit  through  the 
profits  of  their  employers.  But  when  we  make  these 
deductions  we  find  that  we  have  only  a  hundred  thousand 
or  so  of  our  four  millions  left.  Briefly  summed  up, 
therefore,  the  fact  is,  that  the  strong  monopolies  in  manu- 
facturing, mining,  trade,  and  transportation  are  owned 
by  a  very  small  portion  of  the  population.  Just  what 
this  number  is,  it  is  impossible  to  say,  for  the  stock  and 
bonds  of  railroad  companies,  mining  companies,  and 
manufacturing  companies  are  changing  hands  continual- 
ly, and  no  public  record  is  taken  of  their  distribution  and 
ownership.  It  may  possibly  be  true,  however,  that  one 
million  different  persons  own  an  interest  in  some  of  the 
various  monopolies  which  we  have  studied,  excluding  the 
monopolies  in  trade  and  labor.  But  even  if  this  estimate 
is  correct,  it  is  a  well-known  fact  that  a  few  hundred  im- 
mensely wealthy  men  hold  a  large  share  of  the  stock  of 
these  very  profitable  monopolies. 

Leaving  the  questions  which  this  statement  opens  up, 
for  later  consideration,  let  us  consider  the  other  classes 
of  occupations  in  which  men  engage  for  the  purpose  of 
gain,  and  see  if  this  far-reaching  movement  towards  the 
destruction  of  competition  has  infected  them,  and  whether 
it  has  proved,  or  can  prove,  so  successful  there  as  it  has 
in  the  industries  considered  in  preceding  chapters. 

The  third  great  class  of  occupations,  rendering  profes- 
sional or  personal  service,  gives  employment  to  over  four 


MONOPOLIES  IN  OTHER  INDUSTRIES.        12$ 

million  persons  (4,074,328),  and  includes  in  its  members 
those  in  widely  separated  ranks  of  society. 

It  is,  of  course,  true  that  the  competition  in  the  pro- 
fessions is  far  more  a  competition  of  ability,  real  or  sup- 
posed, than  it  is  a  competition  of  price  ;  and  the  former 
is  a  competition  which  is  never  likely  to  be  done  away 
with.  Yet  in  all  occupations,  to  a  greater  or  less  degree, 
there  tends  to  arise  more  or  less  competition  in  relation 
to  price,  and  the  professions  are  not  entirely  exempt. 
Lawyers,  indeed,  seem  never  to  have  felt  the  necessity 
of  fixing  any  minimum  tariff  of  fees  ;  and  so  far  as  is 
known,  clergymen  have  never  combined  to  advance  their 
salaries.  But  the  medical  profession  has  its  well  known 
code  of  ethics  which  debars  its  members  from  "  pushing 
their  business,"  and  has,  in  certain  places  and  times  at 
least,  prescribed  a  minimum  tariff  of  fees.  It  should  be 
clearly  understood,  however,  that  this  is  not  cited  with 
the  intention  of  putting  any  aspersion  upon  the  medical 
profession  in  any  way.  The  services  which  are  freely 
rendered  to  the  poor,  and  the  disgusting  indecencies  and 
insults  which  are  thrust  upon  the  public  by  some  who 
choose  to  ignore  this  code  of  medical  ethics,  would  make 
us  ready  to  forgive  very  much  worse  things  than  a  pos- 
sible tendency  among  members  of  the  profession  to  re- 
frain from  "cutting  under  each  other"  in  the  matter  of 
fees. 

But  while  the  three  older  professions  have  evidently 
little  need  or  disposition  to  combine  for  the  purpose  of 
increasing  their  income  from  the  community,  some  of 
the  newer  professions  occupy  different  ground.  Archi- 
tecture is  coming  to  be  a  profession  of  no  small  im- 
portance. The  principal  architects'  society,  the  Associa- 
tion of  American  Architects,  has  a  regular  schedule  of 


124  MONOPOLIES  AND   THE  PEOPLE. 

minimum  commissions  below  which  its  members  are  for- 
bidden to  go.  Another  singular  case  of  professional 
combination  is  the  Musical  Protective  Union,  a  combina- 
tion of  professional  musicians  in  New  York  City,  which 
fixes  minimum  prices  that  its  members  may  charge  for 
their  services.  On  the  whole,  however,  it  must  be  said  that 
the  limitation  of  competition  in  the  professional  and  intel- 
lectual occupations  is  in  this  country  still  in  its  infancy. 
In  England  the  fixing  of  prices  of  professional  service 
by  usage  is  very  much  more  common,  and  in  many  pro- 
fessions the  check  to  competition  thus  effected  is  of  no 
small  importance.  To  the  careful  observer  there  are 
indications  of  a  tendency  in  a  similar  direction  in  this 
country.  Is  it  not  more  and  more  common  in  profes- 
sional circles  to  see  a  slur  cast  on  the  man  who  will 
work  cheaply  ?  There  is  hardly  an  occupation  or  spe- 
cialty which  has  not  its  Associations  and  its  periodicals  ; 
and  what  is  more  natural  than  that  an  association  for 
mutual  benefit  should  come  to  adopt  that  certain  method 
of  securing  mutual  benefit  at  the  expense  of  the  public, 
the  restraint  of  competition  ? 

Examining  the  remaining  occupations  in  this  division, 
we  find  that  those  engaged  in  them  form  a  large  percentage 
of  the  whole  population.  There  are  of  laborers  whose 
occupation  is  not  more  definitely  specified,  1,859,223. 
Then  there  are  1,075,655  domestic  servants,  121,942 
launderers,  77,413  hotel  and  restaurant  employes, 
24,000  soldiers,  14,000  messengers,  and  enough  in  other 
occupations  similar  to  the  above,  in  that  very  many 
persons  can  engage  in  them  without  special  training,  to 
make  it  certain  that  at  least  three  fourths  of  the  members 
of  this  division,  or  a  little  over  three  million  persons,  be- 
long to  the  class  of  unskilled  workers,  among  whom,  as 


MONOPOLIES  IN  OTHER  INDUSTRIES.        12$ 

we  have  already  seen,  the  attempt  to  limit  competition 
and  force  up  wages  has  not,  and  cannot  possibly  have, 
more  than  a  limited  and  doubtful  success.  Nevertheless, 
to  a  very  great  extent,  the  unskilled  laborers  of  the  coun- 
try as  well  as  those  working  at  minor  trades  are  organ- 
ized for  mutual  help  and  protection  ;  and  while  they  can- 
not increase  much  the  rate  of  their  wages  without  draw- 
ing a  host  of  competitors,  they  can  do  much  in  the  way 
of  protecting  themselves  from  injustice  and  extortion,  as 
we  have  pointed  out  in  the  preceding  chapter.  It  may 
be  possible,  indeed,  that  certain  changes  in  the  future, 
as  the  requirement  of  greater  skill  and  efficiency  in  all 
kinds  of  labor,  may  make  combinations  in  this  class  of 
occupations  easier  and  more  effective.  Our  domestic 
affairs,  for  instance,  are  constantly  growing  more  com- 
plex, and  require  greater  skill  in  their  operation.  House- 
keepers are  prone  to  think  the  "  servant  girl "  problem 
serious  and  perplexing  enough  already.  It  remains  to 
be  seen  what  they  would  say  if  a  "  Cooks'  Protective 
Union,"  a  "Chambermaids'  Sisterhood,"  or  a  "Laun- 
dresses' Amalgamated  Association,"  should  assume  con- 
trol of  the  wages  and  hours  of  labor  of  their  domestics. 

To  sum  up,  we  find  that  as  a  whole  the  4,000,000  per- 
sons engaged  in  rendering  professional  and  personal  ser- 
vices are  in  general  not  increasing  the  cost  to  the  public 
of  their  services  by  combining  together  to  limit  competi- 
tion ;  and  that  so  far  as  we  can  determine,  it  is  not 
probable  that  many  of  them  can  do  so  in  the  future, 
even  if  they  are  so  disposed. 

There  remains  yet  one  important  class  of  the  com- 
munity to  be  considered  :  those  engaged  in  agriculture. 
Can  the  farmers  of  the  country  fall  into  line  behind  the 
manufacturers  and  miners  and  railroad  owners,  and 


126  MONOPOLIES  AND   THE  PEOPLE. 

force  up  the  price  of  their  products  by  killing  competi- 
tion, to  correspond  with  the  increased  prices  which  are 
demanded  in  many  other  lines  of  industry  ?  They  have 
one  thing  in  their  favor  in  that  the  principal  products  of 
the  soil  are  necessaries  of  life,  which  the  community 
cannot  do  without  whether  the  price  be  great  or  small, 
although  an  increase  in  price  is  sure  to  result  in  a  de- 
creased consumption. 

We  may  best  determine  this  question  by  inquiring  ex- 
actly how  the  prices  are  forced  up  by  monopolies. 
There  can  be  but  one  way.  The  laws  of  supply  and 
demand  hold  good,  and  it  is  out  of  the  power  of  the 
producer  to  greatly  affect  the  demand.  It  is  only  the 
supply  of  which  he  has  control.  From  the  manufactu- 
rers' trust  to  the  laborers'  union,  the  only  way  in  which 
prices  can  be  controlled  is  through  a  reduction  in  the 
supply  of  goods  made  or  men  allowed  to  work  ;  and  if 
the  price  were  to  be  arbitrarily  raised,  the  result  would 
be  the  same  ;  there  would  be  a  surplus  of  goods,  or  some 
unemployed  workmen.  In  order  to  raise  the  price 
of  his  products,  then,  the  farmer  must  do  one  of  two 
things,  which  will  bring  in  the  end  the  same  result.  He 
must  send  less  of  his  products  to  market — lessen  the 
supply — or  refuse  to  sell  any  thing  at  less  than  the  in- 
creased price  which  he  desires.  In  either  case,  if  he  plants 
the  same  acreage  and  gets  the  same  yield  as  before,  he 
will  have  a  part  of  his  crop  left  on  his  hands. 

The  query  then  comes,  can  it  be  possible  for  the  far- 
mers all  over  the  country  to  form  so  perfect  and  well- 
disciplined  an  organization  that  every  member  shall 
diminish  his  remittances  to  market  of  grain,  wool,  meat, 
hay,  or  what  not,  enough  to  raise  prices  ;  or  that  he  shall 
refrain  from  selling  all  these  articles  below  a  certain 


MONOPOLIES  IN  OTHER  INDUSTRIES.        \2J 

defined  price  ?  It  must  be  plain  to  every  intelligent 
person  that  it  would  be  a  practical  impossibility  to  effect 
such  a  thing.  It  would  be  possible  to  bring  only  a  small 
percentage  of  the  farmers  in  an  area  3,000  miles  in 
length  and  1,500  in  width  into  a  single  organization  ; 
and  it  would  be  essential  to  the  success  of  this,  as  of 
every  other  scheme,  that  no  outside  competition  should 
be  permitted  to  exist. 

It  may  be  argued  that  the  Knights  of  Labor  succeeded 
to  a  degree  in  gathering  into  one  organization  a  large 
proportion  of  the  workingmen  in  all  the  various  trades 
in  the  country  ;  but  their  members  were  mostly  in  cities, 
many  worked  together  in  great  factories,  and  as  regards 
ease  of  combination,  they  were  far  more  easily  handled 
than  the  widely  scattered  farmers  of  the  country  could 
hope  to  be.  Besides,  the  Knights  of  Labor  organization 
appears  to  be  too  unwieldy  and  cumbrous  to  be  long 
succcessful,  and  internal  dissension  seems  to  have  already 
brought  it  near  its  end.  It  is  plain  that  the  farmers  are 
powerless  to  effect  a  reduction  of  the  competition  among 
themselves.  Nor  is  this  condition  at  all  likely  to  change. 
Farming  is  unlike  other  modern  productive  industries  in 
that  the  cost  of  production  does  not  decrease  as  it  is 
conducted  on  a  larger  scale.  The  most  profitable  farms 
are,  and  perhaps  will  always  be,  the  small  ones,  where 
the  details  of  the  tillage  come  directly  under  the  eye  of 
the  owner. 

Such  are  the  facts  with  respect  to  the  prospect  of 
making  a  monopoly  of  agriculture,  and  it  would  seem 
that  they  are  so  simple  and  so  easily  understood  that 
no  attempt  would  ever  be  made  to  restrict  competition 
among  farmers.  It  is  to  be  recorded,  however,  that  such 
attempts  are  being  seriously  made.  Prominent  farmers 


128  MONOPOLIES  AND   THE   PEOPLE. 

of  the  West  in  the  spring  of  1888  took  the  preliminary 
steps  towards  the  formation  of  a  farmers'  trust.  Con- 
ventions were  held  and  resolutions  adopted  reciting  that 
the  operation  of  trusts  in  manufacturing  industries  and 
of  monopolies  in  trade  and  transportation  laid  serious 
burdens  on  the  farmers  of  the  country  ;  and  that  in  order 
not  to  be  left  behind  in  the  struggle  for  existence  the 
farmers  must  combine  for  their  own  protection.  Com- 
mittees were  appointed  to  work  out  the  details  of  a  plan 
of  organization  ;  but  the  movement  seems  to  have  lost 
vitality  when  its  projectors  came  to  study  it  in  detail. 
The  preceding  argument  fully  explains  the  reason. 

It  should  be  said,  however,  that  cooperative  associa- 
tions among-  the  farmers  are  growing  at  a  rapid  pace. 
The  Grange  and  the  Farmers'  Alliance  are  primarily 
cooperative  associations  for  the  purpose  of  benefiting 
their  members  in  the  purchase  of  goods  and  in  various 
other  directions,  and  they  are  fast  increasing  in  numbers 
and  influence.  The  attempts  made  to  benefit  their 
members  in  the  sale  of  their  produce  have  been  generally 
confined  to  protection  against  the  "middle  men."  The 
only  movement  of  which  the  author  is  aware  for  restrict- 
ing production  to  increase  price,  has  been  in  certain 
sections  of  the  South,  where  recently  a  general  attempt 
has  been  made  to  restrict  the  acreage  planted  in  tobacco 
in  the  hope  of  raising  the  price. 

It  is  a  matter  worthy  of  note  here  that  the  combined 
influence  of  the  farmers  of  the  country  has  recently  been 
successful  in  securing  legislation  to  defeat  an  important 
outside  competitor.  A  few  years  ago  some  chemists 
found  out  that  from  a  cheap  substance  known  as  beef 
suet,  an  imitation  butter  could  be  made,  which  was  in 
composition  and  appearance  the  same  as  butter  made  by 


MONOPOLIES  IN  OTHER  INDUSTRIES.        1 29 

the  ordinary  process,  and  was  exactly  as  nourishing  a 
food.  There  has  been  much  talk  of  the  halcyon  days  to 
come  when  the  progress  of  science  will  be  so  great  that 
food  will  be  made  in  the  laboratory.  Well,  here  was  an 
important  practical  step  in  that  direction.  A  cheap 
product  worth  three  or  four  cents  a  pound  could  be 
easily  converted  by  a  chemical  treatment  into  a  valuable 
food  worth  three  times  as  much,  and  the  great  profit  in 
the  business  brought  this  substitute  for  butter  rapidly 
into  use.  But  at  once  an  indignant  protest  went  up 
from  the  farmers  of  the  land.  They  were  being  ruined 
by  the  competition  of  the  "  grease  butter  "  as  they  dis- 
respectfully called  it.  There  was  something  suggested 
about  the  idea  that  if  just  as  good  butter  could  be  made 
out  of  the  fat  of  the  cow  as  out  of  her  milk,  and  at  half 
the  expense,  that  it  would  be  a  benefit  to  everybody  in 
the  country  who  had  butter  to  buy.  But  the  weak  pro- 
test for  the  protection  of  the  general  interests  of  the 
whole  people  was  not  heeded,  and  Congress  passed  a  bill 
laying  a  tax  on  the  new  butter  sufficient  to  stop  the  sale. 
Here  was  an  evident  case  of  killing  competition  for  the 
sake  of  the  farming  interests,  and  the  force  of  their 
unorganized  sentiment  alone  was  sufficient  to  secure  the 
desired  legislation.  But  when  the  farmers  attempt  to 
form  a  trust,  they  will  have  to  kill  competition  among 
themselves  instead  of  outside  competition  ;  and  that  is  a 
different  and  far  harder  matter. 

To  agricultural  laborers  the  same  rule  applies  which 
we  have  found  to  govern  other  unskilled  labor,  viz.:  that 
combination  cannot  effect  much  in  raising  wages. 
Added  to  this  is  the  fact  that  they  are  widely  scattered, 
and  that  a  great  proportion  do  not  follow  this  as  a 
steady  occupation.  In  England,  indeed,  there  is  an 


I3O  MONOPOLIES  AND  THE   PEOPLE.  . 

agricultural  laborers'  union,  and  we  may  possibly  come 
to  that  here.  But  our  circumstances  are  widely  different. 
The  fact  that  in  many  sections  the  agricultural  laborer  is 
not  a  "  hand,"  or  an  "  employe*,"  or  "  servant,"  but  a 
"  hired  man,"  is  an  important  one,  for  the  difference  in 
terms  denote  a  vast  difference  in  conditions.  It  is  hardly 
likely  that  an  organization  of  any  sort  is  to  be  expected 
among  those  in  this  occupation. 

This  last  division  of  occupations  contains  the  most 
members  of  any  of  the  four  divisions.  The  farmers  of  the 
country  number  4,225,945  and  the  farm  laborers  number 
3,323,876.  Other  minor  occupations  of  the  division,  as 
gardener,  florist,  etc.,  bring  up  the  total  engaged  in 
agriculture  to  7,670,493. 

We  can  now  make  some  interesting  comparisons.  The 
evident  effect  of  monopoly  is,  in  general,  to  tax  the  com- 
munity at  large  for  the  benefit  of  those  who  own  the 
monopoly.  Let  us  see  what  proportion  exists  between 
the  two  classes  : 

Total  number  of  persons  engaged  in  manufacturing,  min- 
ing, trade,  and  transportation  (occupations  more  or 
less  monopolized) 5,647,368 

Total  number  of  persons  engaged  in  agriculture  and  in 
furnishing  professional  and  personal  services  (occupa- 
tions not  monopolized) 11,744,821 

Thus  at  the  greatest  estimate  we  can  make  of  the 
number  benefited  by  monopolies,  for  each  man  who  is 
gaining  by  them,  two  are  having  their  income  reduced. 
If  we  take  the  estimate  previously  made,  that  the  utmost 
number  of  persons  who  can  possibly  be  reaping  benefit 
by  ownership  of  the  especially  profitable  monopolies, 
trusts,  transportation  lines,  mines,  etc.,  is  one  million,  we 
have  opposed  over  sixteen  millions  of  the  community 
who  are  being  taxed  by  their  operation.  Let  a  sharp 


MONOPOLIES  IN  OTHER  INDUSTRIES.        131 

distinction  be  drawn  at  this  point,  however.  The  above 
comparison  is  to  be  confined  to  the  things  between  which 
it  is  made,  and  not  confused  with  others  to  which  it  has 
no  reference.  It  is  not  a  comparison  of  the  sort  which 
social  agitators  are  fond  of  making  between  the  great 
numbers  of  the  working  classes  and  the  relative  scarcity 
of  the  wealthy.  Except  so  far  as  the  operation  of  profita- 
ble monopolies  by  the  few  tends  to  bring  about  this  un- 
equal distribution  of  wealth,  that  is  a  matter  with  which 
we  have  nothing  now  to  do. 

There  is  one  point  in  this  connection,  however,  which 
it  is  well  to  make  plain,  as  it  concerns  a  class  of  people 
which  is  not  included  in  either  of  the  four  divisions  that 
we  have  already  described — those  who  live  on  the  income 
of  their  property. 

We  have  before  alluded  to  the  fact  that  in  the  popular 
speech  "  capitalist  "  and  "  monopolist "  are  often  used 
interchangeably.  If  we  carefully  consider  the  real  status 
of  the  capitalist,  however,  we  find  that  of  the  three 
requisites  of  production  —  labor,  capital,  and  natural 
agents — capital  is  the  requisite  which  is  most  perfectly 
secured  from  the  control  of  monopoly.  The  rate  of 
interest  for  the  use  of  capital  is  regulated  so  perfectly  by 
the  law  of  supply  and  demand,  that  all  the  anti-usury  laws 
which  have  ever  been  enacted  have  been  able  to  accom- 
plish but  little  in  enabling  the  borrower  to  secure  loans 
at  a  less  rate  than  that  prescribed  by  competition.  The 
reason  for  this  is  plain  on  consideration.  The  total  sup- 
ply of  accumulated  wealth  of  the  whole  civilized  world  is 
engaged  in  this  competition,  and  the  millions  of  wealth 
which  are  added  every  day  are  new  contestants  in  the 
market.  Competition  in  other  products  is  held  in  local 
bounds  by  the  cost  of  shipment  over  long  distances  ;  but 


132  MONOPOLIES  AND  THE  PEOPLE. 

•wealth  in  the  form  of  value  can  be  transferred  quickly 
and  easily  to  any  part  of  the  civilized  world  where  a 
market  awaits  it.  Every  person  who  earns  money  or 
owns  property  is  a  potential  competitor,  in  that  he  can 
be  made  to  lend  his  capital  for  great  enough  induce- 
ments. Under  the  pressure  of  this  competition,  the  price 
for  the  use  of  capital — the  rate  of  interest — has  steadily 
fallen  ;  and  the  enormous  production  of  wealth  of  which 
our  industrial  resources  are  now  capable  is  such  that  the 
fall  is  certain  to  continue,  and  a  very  few  years  will  see 
loans  at  2  per  cent,  as  common  as  those  at  4  per  cent, 
are  to-day.  Combination  to  restrict  competition  among 
those  who  loan  capital  for  investment  is  an  utter  impos- 
sibility. The  number  of  people  with  money  to  loan,  or 
with  property  on  which  they  can  raise  money  for  that 
purpose,  if  they  wish,  is  too  large  a  proportion  of  the 
population  to  be  ever  brought  into  a  combination  to 
restrict  competition.  The  stringency  which  sometimes 
occurs  in  the  money  market  need  not  be  cited  as  a  con- 
tradiction of  this  statement.  That  is  a  matter  which  has 
only  to  do  with  the  currency.  The  broad  fact,  and  it  is 
a  most  important  one,  is  that  capital,  a  necessary  agent 
of  production,  can  never  be  monopolized. 


THE  THEORY  OF  UNIVERSAL  COMPETITION. 

WE  have  now  examined  all  the  important  occupations 
in  which  men  engage  for  the  purpose  of  gain  ;  and  we 
have  found  that  while  certain  large  classes  of  men  still 
have  the  returns  for  their  industry  fixed  by  the  laws  of 
competition,  other  large  and  important  classes  have  been 
able  to  check  and  limit  competition,  so  that  their  returns 
from  their  work  are  constantly  increased  ;  while  others 
still,  are  in  possession  of  certain  agents,  so  necessary 
to  the  community  and  so  rare,  that  a  price  can  be 
exacted  for  their  use  greatly  in  excess  of  the  original  cost 
to  their  owners.  Some  of  the  effects  of  this  state  of 
affairs  it  is  easy  to  perceive.  We  have,  indeed,  pointed 
out  for  each  monopoly  described  some  of  the  especial 
abuses  to  which  it  gives  rise  ;  and  it  is  plain  enough  that 
the  general  tendency  is,  first,  to  greatly  enrich  the  posses- 
sors of  the  strongest  monopolies  at  the  expense  of  all 
other  men  ;  second,  to  give  a  certain  degree  of  advantage 
to  the  possessors  of  minor  monopolies, — as,  for  instance, 
monopolies  in  articles  which  are  luxuries,  and  can  easily 
be  dispensed  with  ;  and  third,  to  seriously  injure  all  those 
engaged  in  occupations  in  which  the  price  of  the  product 
is  still  fixed  by  competition. 

Every  one  will  agree  that  this  is  an  evil  state  of  affairs. 
It  is  not  just  that  my  neighbor,  who  owns  a  mine  or  a 


134  MONOPOLIES  AND    THE  PEOPLE. 

railroad,  should  ask  me  what  he  pleases  for  coal,  or  for 
carriage  of  my  produce  to  market ;  while  I,  being  a 
farmer,  must  sell  the  products  of  my  labor  at  a  price  de- 
termined by  competition  with  the  products  of  ten  thous- 
and other  farms.  No  one  can  deny  at  this  day  that  it  is 
contrary  to  the  principles  of  justice  to  give  to  the  men  in 
any  one  occupation  or  calling  an  advantage  over  those  in 
any  other,  except  in  just  the  degree  that  one  occupation 
is  more  beneficial  to  the  world  than  another.  The  ques- 
tion then  arises,  how  may  we  best  remedy  this  state  of 
affairs?  Shall  our  panacea  be  to  do  away  with  all 
monopolies,  and  put  every  industry  back  upon  the  com- 
petitive system  ?  If  so,  by  what  means  are  we  to  apply 
this  remedy  ?  Or  shall  we  go  to  the  other  extreme  and 
adopt  the  antipodal  doctrine  to  the  foregoing,  that  com- 
petition is  an  evil  which  ought  to  be  done  away  with  ; 
and  then  proceed  to  abolish  competition  in  every  trade 
and  occupation  where  it  still  exists,  if  we  can  find  any 
possible  means  of  accomplishing  such  a  task. 

The  investigation  we  have  already  pursued  gives  us  no 
answer  to  these  questions.  We  have  thus  far  studied 
facts,  and  made  little  attempt  to  deduce  from  them  gen- 
eral truths.  We  are  now  informed  as  to  the  widespread 
growth  of  monopoly  ;  and  we  have  paid  some  attention 
to  the  injustice  and  wrong  to  which  it  gives  rise,  in  order 
that  we  may  understand  the  urgent  necessity  for  finding 
the  right  remedies,  and  finding  them  at  once.  Our  study 
is  henceforth  to  be  devoted  to  this  end.  How  shall  we 
go  about  it?  In  the  first  place,  it  is  evident  that  we 
might  make  a  far  wider  and  more  detailed  investigation 
of  existing  monopolies,  and  still  be  no  nearer  our  desired 
end.  We  might  study  the  facts  concerning  each  especial 
railroad  monopoly  in  the  country,  for  instance,  without 


UNIVERSAL    COMPETITION.  135 

reaching  any  valuable  conclusion  with  regard  to  the 
proper  method  of  restricting  railroad  monopolies  in  gen- 
eral. But  if  we  were  to  take  the  monopoly  exercised  by 
a  single  railroad  company,  and  study  the  principles  on 
which  it  is  founded  and  the  laws  by  which  it  is  governed, 
we  might  then  be  able  to  state  something  of  value  in  ref- 
erence to  proper  methods  for  its  control.  Evidently, 
then,  principles  rather  than  facts  are  to  be  the  chief  sub- 
jects of  our  future  discussion,  although,  of  course,  we  can 
only  discover  these  principles  by  investigating  the  facts 
already  found,  together  with  others  which  may  come  to 
our  notice. 

Our  very  first  and  most  obvious  generalization  from  the 
facts  which  we  have  studied  is,  that  in  all  the  monopolies 
we  have  considered,  the  inherent  principle  is  the  same, 
and  the  effect  on  the  community  is  of  the  same  sort. 
Therefore,  instead  of  hunting  for  separate  remedies  for 
railroad  monopolies  and  trusts  and  labor  monopolies,  we 
will  see  what  the  general  problem  of  monopoly  is,  and 
what  is  the  general  nature  of  the  remedy  that  should  be 
applied ;  the  details  applicable  to  each  case  will,  of 
course,  be  different ;  but  the  underlying  principle  must 
be  the  same. 

But  if  we  examine  our  problem  a  little  more  closely 
we  see  that  the  word  monopoly  seems  to  be  only  a  nega- 
tive, expressing  the  fact  that  competition  is  absent.  We 
will  therefore  direct  our  studies  to  competition  itself, 
and  will  consider  first  its  action  as  the  basis  of  our  social 
system. 

In  the  most  primitive  condition  of  man  which  we  can 
imagine,  each  person  provided  for  his  or  her  own  need. 
The  competition  which  then  existed  was  not  competition, 
in  the  sense  which  we  use  the  word  in  this  volume,  but 


136  MONOPOLIES  AND    THE  PEOPLE. 

was  a  struggle  for  existence  and  a  gratification  of  the 
baser  desires,  of  the  same  sort  as  that  which  now  prevails 
in  the  brute  creation,  resulting  in  a  "  survival  of  the  fittest. ' ' 
With  the  introduction  of  the  family  relation,  the  prin- 
ciple of  the  "  division  of  labor  "  was  utilized,  the  female 
doing  the  hard  and  menial  work,  while  the  male  devoted 
himself  to  hunting  and  fishing,  or  subsisting  on  the  re- 
sults of  his  helpmate's  industry.  As  men's  wants  in- 
creased and  they  became  more  industrious  in  supplying 
them,  this  division  of  labor  was  extended.  The  man 
most  skilful  in  fishing  neglected  the  use  of  the  bow  and 
spear,  and  his  surplus  of  fish  he  exchanged  with  his 
neighbor  for  the  fruit  of  the  chase.  The  very  same 
principle  applied  to  different  tribes  brought  about  the 
first  commerce.  A  pastoral  tribe,  with  large  flocks  and 
herds,  exchanged  their  surplus  products  with  less  civilized 
tribes  who  continued  to  live  by  the  chase,  or  with  a  more 
civilized  people  who  had  begun  to  till  the  soil. 

It  is  plain  that  these  were  first  steps  in  civilization. 
Man,  so  long  as  he  supplies  only  such  of  his  wants  as  he 
can  supply  with  the  labor  of  his  unaided  hands,  must  re- 
main in  a  half-fed,  half-clothed,  and  untaught  condition, 
because  his  strength  and  skill,  when  diverted  in  the  many 
directions  which  his  wants  require,  are  not  enough  to 
enable  him,  even  when  he  spends  all  his  time  at  work,  to 
supply  himself  with  more  than  the  barest  necessaries  of 
life.  It  would  be  interesting  to  trace  the  development 
of  this  principle  of  action  through  its  various  stages 
down  to  the  present  time,  when  we  see  men  everywhere 
working  at  various  trades  and  occupations,  and  always 
to  supply  some  want  of  their  fellow-men.  Every  person 
in  the  community  is  absolutely  dependent  upon  a  multi- 
tude of  others,  most  of  whom  he  knows  nothing  of,  for 


UNIVERSAL   COMPETITION,  I  37 

the  supply  of  almost  all  his  wants.  Human  society  is 
thus  growing  more  and  more  interwoven  and  interdepen- 
dent. The  motto  of  the  Knights  of  Labor  is  a  true  one, 
apart  from  the  altruism  involved  in  it.  "  An  injury  to 
one  is  the  concern  of  all,"  because  the  mass  of  humanity 
is  connected  and  woven  together  by  such  strong  ties  of 
self-interest,  as  well  as  fraternity,  that  a  calamity  to  any 
class  or  country  is  felt  in  some  degree  throughout  the 
civilized  world.  This  is  vastly  more  true  now  than  it 
was  a  half-century  ago.  Under  such  conditions  as 
existed  then,  the  doctrine  of  laissez-faire,  that  the  govern- 
ment should  confine  itself  to  the  prevention  of  violence 
and  crime  and  the  maintenance  of  national  honor  and 
integrity,  letting  alone  the  industries  of  the  country  to 
develop  and  operate  according  to  natural  laws,  was  not 
liable  to  do  harm.  But  the  conditions  now  are  wholly 
changed.  The  interdependence  of  the  community  in- 
volves a  moral  inter- responsibility,  and  the  time  has  come 
when  we  must  recognize  this  by  making  it  a  legal  re- 
sponsibility as  well. 

We  are  now  ready  to  consider  in  detail  this  inter-rela- 
tionship of  society,  and  to  examine  the  natural  laws 
which  govern  it.  We  have  already  stated  the  fact  that, 
broadly  speaking,  each  man  is  engaged  in  supplying  the 
wants  of  his  fellow  men,  because  in  that  way  better  than 
in  any  other  he  can  supply  his  own  wants.  We  shall  find 
this  an  easy  matter  to  understand  if  we  conceive  that 
every  man  puts  the  products  of  his  labor,  of  whatever 
sort  it  be,  into  a  common  public  stock  (offers  it  for  sale), 
and  takes  out  of  this  common  stock  (buys)  the  various 
articles  which  he  wants.  He  does  the  first  simply  that 
he  may  do  the  second,  not  because  he  desires  to  benefit 
his  fellow-men.  The  money  which  he  receives  (as  we 


138  MONOPOLIES  AND    THE  PEOPLE. 

do  not  propose  to  consider  here  any  questions  regarding 
the  currency)  we  may  regard  as  simply  a  certificate  that 
he  has  done  a  certain  amount  of  work  for  the  world,  the 
measure  of  which  is  the  number  of  dollars  he  receives  ; 
and  on  presentation  of  that  certificate,  he  can  obtain 
other  articles  which  he  desires. 

We  have  next  to  consider  the  fact  that  there  is  a  great 
variation  in  the  amount  which  a  man  can  take  out  from 
this  common  stock.  One  man  is  able  to  provide  himself 
from  the  common  stock  with  a  host  of  luxuries,  while 
another  may  only  take  out  a  scant  supply  of  the  barest 
necessaries  of  life.  If  this  distribution  operated  with 
perfect  equity,  a  man  would  be  permitted  to  take  out  of 
this  common  stock  exactly  in  proportion  to  the  benefit 
which  the  world  at  large  received  from  that  which  he 
put  in.  No  human  judgment,  however,  is  competent  to 
fix,  with  even  an  approach  to  precision,  the  relative 
actual  benefit  which  each  member  of  society  renders  to 
his  fellow-men  as  a  whole.  But  our  social  system  effects 
that  for  us  better  than  it  could  be  fixed  by  any  arbitrary 
human  judgment.  This  it  does  by  a  law  known  as  the 
law  of  supply  and  demand.  Instead  of  the  actual  bene- 
fit, this  law  takes  what  people  choose  to  consider  as 
benefit,  which  is  the  granting  of  their  desires,  whether 
they  desire  things  hurtful  or  beneficial.  It  is  these 
desires  for  things  which  others  can  produce  which  con- 
stitute demand.  It  is  to  be  borne  in  mind  that  this  is  a 
broad  term,  and  includes  not  only  desires  for  food, 
clothing,  and  actual  things,  but  for  service  of  every  sort, 
in  short,  demand  is  the  desire  for  any  thing  whatever 
for  which  people  are  willing  to  pay  money.  But  when 
there  is  this  demand — this  willingness  to  pay  money  for 
any  article — people  begin  at  once  to  supply  it,  because 


UNIVERSAL    COMPETITION.  139 

the  money  they  receive  allows  them  to  take  goods  which 
they  wish  from  the  common  stock.  Evidently,  if  there 
is  an  unlimited  supply  of  any  thing,  people  will  not  pay 
money  for  it.  People  will  not  pay  money  for  fresh  air 
to  breathe  when  they  are  out-of-doors,  and  the  supply  is 
unlimited  ;  but  when  indoors,  the  supply  may  be  limited, 
and  they  will  spend  money  to  have  ventilators  and  air- 
pipes  built  to  supply  them  with  fresh  air.  Or  take  the 
contrary  case :  The  supply  of  some  commodity,  say 
flour,  falls  very  short.  Evidently  less  flour  must  be  used 
by  the  world  than  was  used  in  the  years  of  a  more  plenti- 
ful wheat  harvest.  But  no  one  will  wish  to  be  the  one 
to  go  without,  and  most  people  will  pay  a  little  more 
rather  than  do  so.  Therefore  the  price  rises. 

The  competition  which  we  have  chiefly  considered  is 
the  rivalry  which  exists  between  the  men  who  supply  the 
same  sort  of  goods  ;  but  there  is  a  rivalry  among  buyers 
as  well.  Speaking  generally,  every  buyer  is  trying  to 
purchase  for  as  little  as  possible,  and  every  seller  is  try- 
ing to  dispose  of  his  goods  or  services  to  the  world  for  as 
much  as  possible,  which  each  has  a  perfect  right  to  do. 

We  have  already  seen  that  prices  vary  with  the  relative 
proportion  between  supply  and  demand,  rising  as  demand 
rises  or  supply  fails,  and  falling  as  supply  increases  or 
demand  falls  off.  But  to  complete  the  wonderful  perfec- 
tion of  the  mechanism,  the  reciprocal  relation  is  intro- 
duced, so  that  supply  and  demand  vary  with  price.  If 
the  price  rises,  fewer  people  can  afford  to  buy  and  more 
will  be  anxious  to  sell  ;  while  if  the  price  falls,  more 
people  will  wish  to  buy  and  fewer  people  will  be  will- 
ing to  sell. 

We  can  now  easily  see  why  some  men  are  able  to  take 
out  from  the  world's  common  stock  of  product  so  large 


140  MONOPOLIES  AND    THE  PEOPLE. 

an  amount,  while  most  men  can  take  but  a  meagre  allow- 
ance. By  the  law  of  supply  and  demand  the  price  is  far 
higher  for  the  service  which  one  man  renders  to  the 
world  than  another.  Let  us  take  the  operation  of  a  large 
machine  shop,  for  instance.  Only  one  superintendent  is 
needed,  and  he  should  be  a  man  who  has  devoted  much 
time  to  mastering  all  the  details  of  the  business,  and  is 
experienced  and  competent  to  so  govern  the  work  that 
a  large  product  will  be  turned  out  at  a  small  expense. 
There  is  a  demand  in  the  country,  let  us  say,  for  5,000 
such  men  ;  but  out  of  the  5,000  who  are  filling  such 
places,  there  are  perhaps  50  who  seem  almost  faultless  in 
their  skill  and  industry,  there  are  500  who  are  with  one 
or  two  exceptional  faults,  almost  equally  efficient,  there 
are  3,000  who  are  fairly  good  men,  and  the  rest  may  be 
classed  as  those  who  hold  their  positions  because  better 
men  for  the  place  cannot  be  had.  So  with  the  skilled 
machinists,  the  relation  of  supply  and  demand  is  such 
that  the  price  of  their  labor  is  kept  up  to  perhaps  $4.00 
per  day.  But  of  common  laborers  the  supply  is  so  re- 
lated to  demand  that  the  price  of  their  work  is  very  low. 
Thus  the  three  classes  take  very  unequal  amounts  from 
the  common  stock.  The  superintendent,  perhaps,  is  able 
to  take  five  thousand  dollars'  worth  of  goods  each  year. 
The  skilled  workman  can  spend  perhaps  one  thousand  five 
hundred  dollars,  while  the  laborer  can  spend  but  five  or  six 
hundred  dollars.  Thus  the  men  who  secure  the  greatest 
amount  of  wealth  in  return  for  their  services  to  the  world, 
secure  it  because  people  are  willing  to  pay  it  rather  than 
pay  less  for  men  of  less  ability.  This  is  not  the  same 
as  rewarding  a  man  according  to  the  actual  benefit  which 
he  does  to  the  community,  but  it  is  an  approach  to  it  ;  and 
it  seems  to  be  as  close  an  approach  as  is  possible  by 
human  methods. 


UNIVERSAL   COMPETITION.  141 

This  social  system  is  not  the  creation  of  any  man  or 
set  of  men,  but  has  grown  of  itself  out  of  the  tendency 
among  men  to  secure  the  things  they  wish  for  with  the 
least  exertion.  And  its  theoretical  working  is  marvel- 
lously perfect.  Any  thing  which  men  desire  sufficiently 
to  exert  themselves  to  secure  it,  can  be  bought  with  a 
small  part  of  the  time  and  labor,  measured  in  money, 
which  would  be  required  if  each  made  it  for  himself. 
Not  only  this,  but  the  aim  of  every  man  is  to  do  the 
greatest  service  to  the  world  and  best  meet  its  desires, 
thus  securing  in  return  the  greatest  rewards  for  him- 
self. Rivalry  among  purchasers  constantly  tends  to 
increase  the  rewards  of  the  producers,  while  competition 
among  the  latter  tends  toward  the  furnishing  of  a  better 
article  at  a  smaller  price.  These  two  forces  hold  each 
other  in  stable  equilibrium,  for  a  variation  tends  always 
to  bring  things  back  to  their  normal  condition. 

Let  us  look  more  closely  at  the  theory  of  the  competi- 
tion among  producers.  We  see  that,  speaking  broadly,  all 
occupations  are  competing  with  each  other.  If  changes 
in  the  supply  or  demand  raise  the  rewards  in  any  calling, 
men  will  leave  other  work  to  engage  in  it.  Men  by  the 
pressure  of  competition  are  forced  to  seek  out  the  easiest 
and  most  direct  methods,  and  to  learn  how  to  secure  the 
greatest  results  with  the  least  expenditure  of  labor  and 
material. 

It  is  this  principle  which  lies  at  the  very  root  of  our 
industrial  development.  Men  have  so  striven  to  meet 
each  other's  competition  and  outstrip  each  other  in  the 
production  of  superior  goods  at  low  prices,  that  the  cost 
of  the  staple  articles  of  consumption,  measuring  by  the 
labor  required  to  produce  them  now  and  the  labor  re- 
quired by  the  clumsy  tools  and  hand  work  of  a  century 


142  MONOPOLIES  AND    THE  PEOPLE. 

ago,  is  from  a  tenth  to  a  hundredth  of  the  cost  in  those 
days.  It  must  be  remembered,  too,  that  this  system  of 
competition  is  in  accordance  with  the  sense  of  inaliena- 
ble personal  rights  which  is  implanted  in  the  breast  of 
every  man.  The  work  of  my  hands  and  brain  are  my 
own.  In  disposing  of  it  for  a  price,  I  have  a  right  which 
none  may  deny  to  obtain  such  a  sum  as  I  can  induce 
any  one  to  pay  me.  If  I  choose  to  sell  it  for  less  than  my 
neighbor,  it  is  my  right.  In  short,  the  open  market  is 
open  to  all ;  and  every  man  has  a  right  to  sell  there  his 
labor,  his  skill,  or  his  goods,  of  whatever  sort  he  can  pro- 
duce, at  such  a  price  as  he  can  obtain.  The  same  is  true 
of  the  buyer.  I  have  a  right  to  go  into  the  open  market 
and  secure  such  goods  as  any  one  wishes  to  sell  me  at  the 
lowest  price  for  which  he  will  part  with  them.  A  curious 
illustration  of  this  sense  of  personal  right  is  the  custom 
duties  on  imported  goods.  It  is  an  evidence  of  this  in- 
herent feeling  of  a  natural  right  that  both  public 
opinion  and  the  law  hold  that  it  is  a  much  less  seri- 
ous crime  to  smuggle  than  to  steal.  There  are  a  dozen 
people  who  would  smuggle,  if  tempted  to  do  so,  to  one 
who  would  steal.  Another  illustration  is  the  opposition 
shown  to  sumptuary  laws  on  the  same  grounds. 

It  is  to  be  said  that  the  fact  that  competition  lies  at  the 
foundation  of  our  industrial  civilization,  tersely  expressed 
in  the  saying,  "  Competition  is  the  life  of  trade,"  has  long 
been  known,  and,  to  a  certain  extent,  appreciated.  The 
common  law,  based  on  the  decisions  of  men  most  emi- 
nent for  wise  insight  and  sound  judgment,  has  always 
held  that  combinations  to  restrict  competition  and  estab- 
lish a  monopoly  were  contrary  to  public  policy,  and  the 
protection  of  the  law  has  invariably  been  refused,  whether 
they  were  combinations  of  labor  or  of  capitalized  indus- 


UNIVERSAL    COMPETITION,  143 

tries.  The  establishment  of  labor  combinations,  indeed, 
was  long  a  criminal  offence,  as  we  have  pointed  out 
more  fully  in  the  chapter  devoted  to  that  subject.  It 
must  be  said,  too,  that  the  principle  has  come  to  be 
generally,  though  rather  blindly,  understood  by  the 
masses  of  men.  It  is  recognized,  though  perhaps  not 
very  clearly,  that  competition  lowers  the  prices  of  goods, 
and  that  this  benefits  every  consumer.  Let  a  proposition 
to  build  a  competing  railroad  line,  or  a  competing  elec- 
tric-light plant  be  submitted  to  popular  approval,  and, 
under  the  impression  that  they  are  benefiting  them- 
selves, hard-working  men  will  cheerfully  assume  heavy 
burdens  of  taxation  to  aid  the  new  enterprise.  So  blind 
and  unreasoning  indeed,  is  this  popular  abiding  faith 
in  the  merits  of  competition,  that  it  has  been  responsible 
for  some  of  the  greatest  wastes  of  wealth  in  unproductive 
enterprises  that  have  ever  been  known. 

We  have  now  examined  the  theory  of  universal  compe- 
tition as  commonly  accepted  at  the  present  day,  and  it  is 
rightly  considered  a  fundamental  principle  of  society. 
It  is  the  practice  of  most  economic  writers  of  the  ortho- 
dox school  to  lay  great  stress  on  the  importance  of  this 
fundamental  principle,  and  enlarge  upon  its  various 
manifestations.  The  many  attempts  to  limit  and  destroy 
competition,  which  we  have  studied,  they  consider  merely 
as  abnormal  manifestations  which  are  opposed  to  law, 
and  so  not  worth  while  considering  very  fully.  But  we 
have  seen  clearly  to  what  extent  the  destruction  of  com- 
petition has  gone  on  ;  and,  with  this  knowledge,  the  ques- 
tion almost  inevitably  occurs  to  us  :  Is  not  this  decay 
and  death  of  competition,  this  attempt  to  suppress  it 
under  certain  conditions,  too  wide  and  general  a  move- 
ment to  be  treated  as  merely  a  troublesome  excrescence  ? 


144  MONOPOLIES  AND    THE  PEOPLE. 

Is  it  not  likely  that  there  are  certain  fixed  laws  regarding 
competition  which  determine  its  action  and  operation, 
and  sometimes  its  death  ?  If  this  be  so,  it  is  of  the  high- 
est importance  that  we  find  and  study  these  laws ;  and  to 
that  purpose  we  will  devote  the  following  chapter. 


XI. 

THE  LAWS  OF  MODERN  COMPETITION. 

THUS  far  in  our  study,  we  have  assumed  that  we  knew 
what  competition  was.  Now,  however,  as  we  are  to 
study  it  scientifically,  we  are  in  need  of  an  exact  defini- 
tion, that  we  may  know  just  what  the  term  includes. 
Prof.  Sturtevant,  in  his  "  Economics,"  says  :  "  Competi- 
tion is  that  law  of  human  nature  by  which  every  man  who 
makes  an  exchange  will  seek  to  obtain  as  much  as  he  can  of 
the  wealth  of  another  for  a  given  amount  of  his  own  wealth." 
Simmer  this  down  to  its  essence,  and  we  have  simply  : 
Competition  is  selfishness.  To  the  other  evident  faults  of 
the  definition  we  need  not  allude.  It  is  a  much  more 
satisfactory  definition  which  Webster's  Dictionary  gives 
us,  for  it  includes  the  idea  that  competition  necessitates 
two  or  more  parties  to  exercise  it  :  "  Competition  is  the 
act  of  seeking  the  same  object  that  another  is  seeking.  But 
this  is  too  broad  a  definition  for  our  purpose.  It  takes 
in  competitions  for  fame,  social  standing,  etc.,  with  which 
we  have  nothing  to  do. 

Failing  to  find  a  satisfactory  definition,  let  us  make 
one,  as  follows  :  Competition  is  that  force  of  rivalry  be- 
tween buyers  or  between  sellers  which  tends  to  make  the 
former  give  a  greater  price  for  the  commodity  they  wish  to 
secure,  and  tends  to  make  the  latter  offer  better  commodities 
for  a  less  price. 

i45 


146  MONOPOLIES  AND    THE  PEOPLE. 

That  competition  is  a  force,  even  in  the  popular  esti- 
mation, is  evidenced  by  such  common  expressions  as 
"  the  pressure  of  competition,"  "  a  strong  competition," 
and  indeed,  "  the  force  of  competition."  But  these  very 
expressions  show  us  as  well,  what  we  have  already  found 
to  be  true  in  the  preceding  chapters,  that  it  is  not  a  con- 
stant force  but  a  variable  one.  What,  then,  are  the  laws 
of  its  variation  ? 

Let  us  see  what  we  can  learn  by  a  study  of  three 
typical  examples  of  the  force  of  competition.  Let  us 
take  first  the  business  of  growing  corn.  There  are 
perhaps  three  million  farmers  in  the  United  States 
engaged  in  producing  corn,  and  each  one  of  these  com- 
petes with  all  the  others.  Is  this  doubted  ?  We  have 
defined  competition  as  a  rivalry  that  tends  to  make  the 
sellers  offer  better  goods  for  a  less  price.  Now  at  first 
sight  it  may  seem  that  there  is  no  rivalry  at  all.  Neigh- 
boring farmers  work  together  in  all  harmony  ;  and  no 
man  thinks  that  because  his  neighbors  have  raised  a 
large  crop  of  corn,  he  is  in  any  way  injured.  And  yet 
this  tendency  to  give  better  goods  and  lower  prices  exists 
and  is  plainly  felt.  Suppose  a  new  and  superior  variety 
of  corn  were  introduced,  which  buyers  preferred.  Some 
farmers  would  at  once  begin  to  raise  it,  so  that  they 
might  be  more  sure  of  a  market  and  perhaps  of  'a  better 
price,  and  other  farmers  would  be  obliged  to  follow  suit 
to  meet  the  competition.  Again,  consider  that  the  supply 
and  demand  adjust  themselves  to  each  other  through 
competition.  For  suppose,  at  the  ruling  price,  the  demand 
to  be  less  than  the  supply  ;  then  to  increase  the  demand, 
the  price  must  fall  ;  and  the  cause  of  the  fall  in  price  is 
simply  that  the  farmers  compete  with  each  other  for  the 
market,  and  lower  their  prices  in  order  to  secure  a  sale 


THE  LAWS  OF  MODERN  COMPETITION.      147 

for  their  crops.  Note,  however,  that  the  rivalry  in  this 
case  never  becomes  a  personal  one.  Each  farmer  recog- 
nizes that  an  increased  supply  lessens  the  price  for  his 
goods  ;  but  his  neighbor's  extra  acreage  is  such  a  drop 
in  the  bucket,  that  he  never  thinks  of  it  as  being  really  a 
rival  of  his  own  crop. 

Take  as  a  second  example,  the  wholesale  paper  trade. 
Here  are  perhaps  three  hundred  men,  each  knowing 
personally  many  of  his  competitors  and  probably  hating 
some  of  them  cordially.  Each  striving  to  secure  for 
himself  all  the  trade  possible,  and  to  gain,  if  he  can,  his 
rivals'  customers.  He  sends  out  his  salesmen  with 
instructions  to,  "  Sell  goods  !  For  the  best  prices  you 
can  get,  but  sell  them,  anyhow."  These  "  drummers  " 
are  sharp,  active  business  men,  they  might  well  be 
employed  in  directing  some  productive  process  ;  but 
they  go  out  and  spend  their  time  in  inducing  customers 
by  all  the  means  in  their  power  to  buy  their  goods. 
They  spend  money  in  various  "  treats  "  to  secure  the 
good-fellowship  of  the  man  with  whom  it  is  desired  to 
trade,  and  use  his  time  as  well  as  their  own.  Another 
item  of  expense  is  for  advertising  and  for  keeping  the 
firm  name  prominently  before  the  purchasing  public. 
All  these  things  cost  money,  as  any  wholesale  merchant 
engaged  in  a  business  where  there  is  sharp  competition 
can  testify.  It  may  be  thought  that  a  firm  which  would 
have  the  courage  to  do  away  with  all  these  expenses  and 
give  the  money  thus  saved  to  their  patrons  in  reduced 
prices  and  better  goods,  would  be  able  to  keep  its  trade 
and  even  gain  over  its  competitors.  But  it  is  hardly  so  ; 
most  men  are  more  likely  to  be  wheedled  into  taking 
slightly  inferior  goods  at  a  slightly  greater  price. 

Another  matter  to  be  considered  in  this  connection  is 


148  MONOPOLIES  AND    THE  PEOPLE. 

the  variation  in  price.  In  the  case  of  the  producers  of 
corn,  we  saw  that  prices  were  practically  uniform  at  any 
given  place,  being  fixed  by  the  ratio  of  supply  and 
demand  in  the  chief  markets  of  the  world.  But  in  mak- 
ing sales  of  paper,  the  sharp,  close-dealing  buyer  is 
generally  able  to  secure  a  better  price  than  a  buyer  not 
posted  in  regard  to  the  condition  of  the  paper  trade. 

As  competition  becomes  more  intense,  its  burdens 
become  more  heavy  to  carry.  Perhaps  two  of  the 
largest  houses  in  the  trade,  who  are  able  to  force  prices 
lowest,  come  to  a  sort  of  tacit  understanding  that  their 
salesmen  "  will  respect  each  others  rights  a  little  and  not 
force  prices  down  beyond  all  reason."  It  is  plain  that 
here  the  foundation  is  laid  for  the  establishment  of  a 
monopoly.  Yet  the  agreement  certainly  seems  to  be 
nothing  more  than  these  two  firms  have  a  right  to  make. 
Its  result  is  seen,  however,  in  a  slight  increase  in  the 
price  their  customers  have  to  pay.  Soon  the  tacit  agree- 
ment becomes  a  formal  one.  Then  other  firms  are  taken 
in.  The  first  seed  has  borne  fruit.  The  combination 
grows  larger  and  stronger.  The  number  of  producing 
units  is  growing  less.  Finally  it  includes  practically  all 
the  paper  manufacturers  in  the  country.  Whoever  wants 
paper  must  buy  of  the  combination,  there  is  no  other 
source  of  supply.  Competition  is  dead. 

If  the  combination  is  strong  enough  and  is  managed 
well  enough,  it  may  be  permanent  ;  and  prices  of  paper 
will  be  regulated  by  other  laws  than  the  law  of  competi- 
tion. But  suppose  that  the  number  of  paper  makers  is 
so  great  and  that  they  are  so  widely  scattered  that 
the  combination  proves  difficult  to  maintain  ;  local  jeal- 
ousies creep  in,  and  charges  are  made  of  partiality  on 
the  part  of  the  managers.  The  combination  finally 


THE  LAWS  OF  MODERN   COMPETITION.      149 

breaks  up.  Can  we  expect  a  perfect  return  to  the  old 
system  of  free  competition  ?  When  men  have  once 
reaped  the  enormous  returns  that  are  yielded  by  the 
control  of  a  monopoly,  the  ordinary  profits  of  business 
seem  tame  and  dull.  There  will  surely  be  attempts  to 
form  the  monopoly  anew  on  a  stronger  and  more  perma- 
nent basis  ;  and  even  if  these  attempts  do  succeed  in 
producing  only  short-lived  monopolies,  the  effect  will  be 
to  keep  the  whole  trade  and  all  dependent  upon  it  in  a 
state  of  disquiet  and  uncertainty.  Prices  will  swing  up 
and  down  very  suddenly  between  wide  limits  ;  and  it  is 
everywhere  recognized  that  stability  in  price  is  a  most 
important  element  in  inducing  general  prosperity.  A 
perusal  of  the  trade  journals  for  the  years  1887  and  1888 
will  convince  one  of  the  truth  that  when  a  combination 
is  once  formed,  its  members  are  loth  to  try  competition 
again.  A  considerable  number  of  combinations  which 
were  formed  in  1887  were  soon  broken  up,  often  from 
the  strength  of  old  feuds  and  jealousies.  But  in  almost 
every  case  they  have  been  formed  anew  on  a  stronger 
basis  after  a  short  experience  of  competition. 

This  matter  of  the  variation  in  price  is  a  very  im- 
portant one,  and  it  has  an  important  influence  in  check- 
ing business  prosperity.  Men  are  far  less  apt  to  engage 
in  an  enterprise,  if  they  cannot  calculate  closely  on  prices 
and  profits.  But  the  main  point,  after  all,  is  the  waste 
which  is  due  to  competition.  It  is  for  the  interest  of  the 
public  at  large  that  the  papermakers  should  devote  all 
the  energies  which  they  give  to  their  business  to  making 
the  best  quality  of  each  grade  of  paper  with  the  least 
possible  waste  of  labor  and  material. 

Take  for  a  third  example  two  railway  lines  doing  busi- 
ness between  the  same  points.  We  have  fully  pointed 


150  MONOPOLIES  AND  THE  PEOPLE. 

out  the  practical  working  of  this  sort  of  competition  in 
the  chapter  devoted  to  railways.  It  is  plain  that  the  gen- 
eral effect  is  a  fluctuation  of  rates  between  wide  limits, 
an  enormous  waste  of  capital  and  labor,  and  ultimately, 
the  permanent  death  of  competition  by  the  consolidation 
of  the  two  lines. 

In  comparing  now  the  above  three  cases,  the  most 
noticeable  difference  in  the  conditions  is  in  the  number  of 
fompeting  units.  There  were  in  the  first  example  three 
million  competitors  ;  in  the  second,  three  hundred  ;  and 
in  the  last,  but  two. 

The  first  difference  in  the  competition  which  existed  is 
in  intensity.  In  the  case  of  the  producers  of  corn,  com- 
petition was  so  mild  that  its  very  existence  was  doubted. 
In  the  case  of  the  papermakers  it  was  vastly  more  in- 
tense, so  that  it  caused  those  engaged  in  it  to  take  steps 
to  restrict  and  finally  abolish  it.  In  the  case  of  the  rail- 
roads it  was  still  more  intense,  so  that  it  was  not  able  to 
survive  any  length  of  time,  but  had  to  suffer  either  a 
temporary  or  permanent  death  very  soon.  Let  us  state, 
therefore,  as  the  first  law  of  competition,  this  :  In  any 
given  industry  the  intensity  of  competition  tends  to  vary  in- 
versely as  the  number  of  competing  units. 

We  also  saw  that  among  the  producers  of  corn  there 
was  virtually  no  waste  of  energy  from  competition. 
Among  the  paper  makers  there  was  a  large  waste.  And 
in  the  case  of  the  railroads,  the  whole  capital  invested  in 
the.  rival  railroad,  as  well  as  the  expense  of  operating  it, 
was  probably  a  total  waste.  Let  us  state,  then,  for  a  sec- 
ond law  of  competition  :  In  any  given  industry  the  waste 
due  to  competition  tends  to  vary  directly  as  the  intensity.  As 
an  additional  example  to  prove  the  truth  of  these  laws, 
take  the  competition  which  exists  between  buyers.  In 


THE   LAWS  OF  MODERN  COMPETITION.      151 

the  case  of  ordinary  retail  trade  the  number  of  buyers  is 
very  great,  and  the  competition  between  them  is  so  mod- 
erate that  we  hardly  remember  that  it  exists.  It  is  diffi- 
cult to  see  how  there  could  be  any  waste  from  this  com- 
petition among  buyers,  at  least  of  any  amount.  Ex- 
pressed in  the  language  of  the  laws  we  have  found  :  The 
number  of  competing  units  is  so  great  that  competition 
is  neither  intense  nor  wasteful. 

From  these  two  laws  and  a  study  of  the  examples  we 
have  given,  it  is  easy  to  deduce  a  third.  We  have  seen 
that  when  competition  became  very  wasteful,  monopoly 
arose  ;  indeed,  we  have  noted  the  working  of  this  law  all 
through  our  investigation.  The  principal  cause  assigned 
for  the  formation  of  the  linseed-oil  trust  was  the  waste 
which  intense  competition  had  caused.  The  third  law  is, 
then  :  In  any  given  industry  the  tendency  toward  the  death 
of  competition  (monopoly)  varies  directly  with  the  waste  due 
to  competition. 

We  might  now  combine  these  three  laws  to  deduce  the 
fourth  law,  which  is  :  In  any  given  industry  the  tendency 
toward  the  death  of  competition  (monopoly]  varies  inversely 
with  the  number  of  competing  units.  But  this  law  is  also 
proved  independently.  Look  back  over  all  the  monop- 
olies we  have  studied,  and  it  will  be  seen  that  one  of  the 
most  important  conditions  of  their  success  was  the  small 
number  of  competitors.  Fifty  men  could  be  brought  to- 
gether and  organized,  and  made  to  bury  their  feuds  and 
rivalries,  when  with  a  thousand  the  combination  would 
have  been  impossible.  We  have  seen,  in  the  case  of  the 
farmers,  how  their  great  number  alone  has  prevented 
them  from  forming  combinations  to  restrict  the  compe- 
tition among  themselves. 

It  should  be  said  that  these  laws,  like  all  other  laws  of 


152  MONOPOLIES  AND  THE  PEOPLE. 

economics,  are  not  to  be-  taken  in  a  narrow  mathematical 
sense.  We  cannot  study  causes  and  effects  dependent  on 
the  caprice  of  men's  desires  and  wills  with  the  minute 
exactness  with  which  we  solve  numerical  problems. 
Taken  in  the  broad  sense,  however,  the  study  we  have 
made  in  the  preceding  chapters  is  sufficient  proof  of 
their  truth. 

The  common  expressions  of  trade  afford  still  further 
evidence.  We  often  hear  the  expression  :  "  A  healthy 
competition."  But  the  very  existence  of  the  phrase  im- 
plies that  there  may  be  an  unhealthy  competition,  and  if 
so,  what  is  it  ?  Is  it  not  that  competition  whose  intensity 
is  so  great  that  it  causes  a  large  waste  of  capital  and 
labor  in  work  other  than  production  ;  whose  intensity  is 
so  great  that,  like  an  animal  or  a  machine  working  under 
too  great  a  load,  it  labors  intermittently, — now  acting 
with  great  intensity  and  forcing  prices  far  below  their 
normal  plane,  now  pausing  in  a  reaction,  when  a  tem- 
porary combination  is  formed,  and  allowing  prices  to 
spring  back  as  far  above  the  point  indicated  by  the  rela- 
tion of  supply  and  demand ;  and  finally  reaching  the 
natural  end  for  unhealthiness — death.  In  fact,  a  recent 
economic  writer  declares  that  especially  intense  compe- 
tition should  be  called  war,  as,  indeed,  it  frequently  is 
called,  rather  than  competition. 

Looking  about  us  for  other  causes  of  variation  in  the 
intensity  of  competition  we  discover  a  fifth  law  :  The 
intensity  of  competition  tends  to  vary  directly  in  proportion 
to  the  amount  of  capital  required  for  the  operation  of  each 
competing  unit,  especially  when  the  interest  on  the  capital  in- 
vested forms  a  large  proportion  of  the  cost  of  production. 
Take,  for  example,  the  case  of  a  railway  line.  All  the 
capital  invested  in  it  is  wasted  unless  the  road  is  in  oper- 


THE  LAWS  OF  MODERN  COMPETITION.      153 

ation.  Hence  it  will  be  better  to  operate  the  road,  so 
long  as  receipts  are  any  thing  more  than  the  expense  of 
operation,  than  to  abandon  it.  An  enterprise  in  which 
no  capital  is  invested  will  cease  operations  when  receipts 
do  not  exceed  its  expenditure  and  there  is  no  prospect  of 
betterment.  But  in  the  total  expense  of  operating  a  rail- 
road, a  large  item  is  the  interest  on  the  capital  invested, 
which  is  as  truly  a  part  of  the  total  cost  of  carrying  the 
traffic  as  is  the  daily  labor  expended  in  keeping  the  road 
in  good  repair.  (In  railway  bookkeeping  only  an  arbi- 
trary line  can  ever  be  drawn  between  capital  account 
and  operating  expenses.)  Now,  in  order  to  pay  operat- 
ing expenses  and  fixed  charges,  railways  must  secure 
traffic.  We  suppose  that  they  are  doing  this  by  competi- 
tion, and  that  they  have  not  yet  combined  to  form  a 
monopoly.  Let  us  suppose  that  this  competition  cuts 
down  receipts  to  a  point  where  they  are  just  sufficient  to 
pay  the  whole  cost  of  carriage.  In  an  enterprise  in  which 
no  capital  was  invested  some  of  the  competitors  would  be 
sure  to  fall  out  when  profits  disappeared  ;  but  here  there 
is  no  such  chance  of  relief  ;  and  though  the  competition 
keeps  on  until  the  receipts  are  only  enough  to  pay  the 
operating  expenses,  still  the  road  is  not  abandoned  be- 
cause then  the  capital  invested,  in  it  would  be  a  complete 
loss.  Changes  in  productive  processes  often  lessen  the 
demand  for  a  line  of  goods  ;  but  the  owners  of  the  capi- 
tal invested  in  factories  and  machines  for  making  these 
goods  may  often  cause  them  to  be  continued  in  opera- 
tion at  a  loss  rather  than  lose  all  that  they  have  invested, 
and  because  they  hope  for  better  days  and  a  renewal  of 
the  demand. 

For  the  sixth  law  of  competition  we  have  :  In  any  given 
industry    the   tendency    toward  the    death   of  competition 


154  MONOPOLIES  AND  THE  PEOPLE. 

(monopoly)  varies  directly  with  the  amount  of  capital  re- 
quired for  each  competing  unit.  This  law  is  proven  in  part 
by  the  preceding  laws  ;  for  when  a  large  capital  is  re- 
quired for  each  competing  unit,  the  number  of  com- 
petitors will  be  small  and  the  tendency  toward  monopoly 
will  be  strong  ;  but  it  may  also  be  proven  independently. 
Business  men,  before  they  form  a  combination,  are  cer- 
tain to  ask  whether  new  competitors  are  likely  to  enter 
the  field  against  the  combination.  Now,  as  we  have  seen 
in  very  many  cases  in  the  preceding  chapters,  when  there  is 
a  great  amount  of  capital  required,  new  competitors  will  be 
very  unlikely  to  enter  the  field.  If  there  is  but  little  capi- 
tal required,  they  will  be  very  apt  to  do  so,  being  tempted 
by  the  prospect  of  large  profits  at  the  monopoly's  prices. 
But  they  know  that  the  combination  will  concentrate  its 
strength  to  fight  them  in  every  way  ;  and  if  they  must 
invest  a  great  deal  of  money  in  buildings,  plant,  etc.,  to 
start  operations,  they  will  be  apt  to  think  twice  before 
they  take  the  field  against  the  combination. 

The  seventh  law  of  competition  is  :  In  any  given  in- 
dustry in  which  natural  agents  are  necessary,  the  tendency 
toward  the  inequality  of  competition  (monopoly)  tends  to  vary 
directly  with  the  scarcity  of  available  like  natural  agents. 

The  influence  of  limited  natural  agents  in  promoting 
the  growth  of  monopolies  is  a  matter  of  the  greatest  im- 
portance. That  the  law  is  true,  is  evident  upon  slight 
investigation.  For  if  some  especial  gift  of  Nature  is  a 
necessity  to  any  industry,  and  those  who  are  engaged  in 
that  industry  can  secure  all  the  available  gifts  of  Nature 
of  that  sort,  there  is  no  opportunity  for  new  competitors 
to  enter  the  field. 

It  is  to  be  noted  that  in  this  seventh  law  we  have  used  in 
apposition  with  the  term  monopoly,  the  term  "  inequality 
of  competition  "  instead  of  "  death  of  competition,"  as  in 


THE  LAWS  OF  MODERN  COMPETITION.      155 

the  preceding  laws.  We  are  now  in  need  of  a  definition 
of  the  term  monopoly.  Webster  defines  it  as  "  the  sole 
control  over  the  sale  of  any  line  of  goods  "  ;  Prof.  New- 
comb  says  "  a  monopoly  is  the  ownership  or  command 
by  one  or  a  limited  number  of  persons  of  some  requisite 
of  production  which  is  not  solely  a  product  of  human 
labor  "  ;  Sturtevant  says  "  a  monopoly  is  such  a  control 
of  the  supply  of  any  desirable  object  as  will  enable  the 
holder  to  determine  its  price  without  appeal  to  competi- 
tion." To  the  first  definition  we  object  that  it  is  both 
narrow  and  indefinite.  The  second  seems  to  omit  such 
important  classes  of  monopolies  as  the  combinations  to 
limit  competition  ;  and  Sturtevant's  definition  is  un- 
scientific in  this  :  Hardly  any  monopoly  exists  whose 
holders  can  without  limit  determine  the  price  of  its 
product.  If  the  price  continues  to  rise,  competition  in 
some  form  will  appear.  Take,  for  example,  the  business 
of  transporting  goods  from  New  York  to  San  Francisco  ; 
if  all  the  railway  lines  combine  to  form  a  monopoly,  the 
competition  of  ocean  steamers  via  Panama  would  eventu- 
ally stop  the  rise  in  rates,  if  no  other  outside  competition 
stopped  it  before.  The  owners  of  a  rich  mine  have  a 
real  monopoly,  though  they  cannot  raise  the  price  above 
a  certain  point  without  being  undersold  by  the  owners 
of  poorer  mines  or  those  more  remote  from  market. 
Consideration  of  these  facts  lead  us  to  construct  the  fol- 
lowing definition  :  A  monopoly  in  any  industry  consists  in 
the  control  of  some  advantage  over  existing  or  possible  com- 
petitors by  which  greater  profits  can  be  secured  than  these 
competitors  can  make.  For  the  law  of  monopolies  we  have  : 
The  degree  of  a  monopoly  depends  upon  the  amount  of  advan- 
tage which  is  held  over  existing  or  possible  competitors. 
When  the  advantage  of  the  monopoly  is  so  great  that  no 
other  competitor  will  try  to  do  business  in  competition 


156  MONOPOLIES  AND  THE  PEOPLE. 

with  it,  we  may  rightly  say  that  competition  is  dead.  The 
great  share  of  the  monopolies  which  are  based  on  this  sev- 
enth law  of  competition,  those  due  to  the  control  of  nat- 
ural agents,  only  restrict  competition  by  the  attainment  of 
an  advantage  over  their  competitors,  and  do  not  destroy  it. 

The  principal  natural  agents  which  are  necessary  to 
production,  and  whose  supply  may  be  so  limited  to  cause 
an  appreciable  monopoly,  are  :  (i)  Land  for  agricultural 
purposes  ;  (2)  land  for  purposes  of  manufacture  or  com- 
merce ;  (3)  transportation  routes,  such  as  mountain 
passes,  room  for  railway  tracks  in  a  city  street,  or  for  gas- 
and  water-pipes  beneath  its  surface  ;  (4)  natural  deposits 
of  minerals  and  metals  ;  (5)  sources  of  water  supply  or 
water  power.  (The  latter  is  unimportant  now  compared 
with  a  score  of  years  ago,  because  of  the  lessened  cost  of 
its  competitor,  steam.) 

Let  us  be  especially  careful  not  to  confound  this 
seventh  law  of  competition  with  a  certain  doctrine  which 
is  now  receiving  more  and  more  credence,  which  is,  in 
brief,  that  the  private  ownership  of  the  gifts  of  Nature 
used  in  production  should  be  abolished.  The  grounds 
in  opposition  to  this  doctrine  we  will  discuss  in  a  later 
chapter.  The  law  we  have  stated  says  nothing  of  the 
right  or  wrong  of  the  private  ownership  of  the  gifts  of 
Nature.  What  it  does  say  is,  that  when  any  of  these  are 
limited  in  amount,  those  who  control  them  are  given  an 
advantage  over  other  would-be  competitors,  which  con- 
stitutes a  monopoly. 

In  considering  the  natural  agents  enumerated  above, 
we  can  easily  see  the  truth  of  the  law.  Agricultural 
lands,  the  most  important  of  natural  agents,  are  in  this 
country  so  abundant  that  their  rental  is  entirely  fixed  by 
competition.  In  England,  where  they  are  so  much  more 
limited  in  area,  rent  is  fixed  by  custom.  As  regards  land 


THE  LAWS  OF  MODERN  COMPETITION.      157 

for  purposes  of  manufacture  or  commerce,  we  have 
already  pointed  out  the  cases  in  which  monopolies  are 
prominent,  as  also  for  transportation  routes.  As  regards 
mineral  wealth,  deposits  of  iron  are  so  numerous  and 
widespread  that  no  monopoly  has  ever  yet  succeeded  in 
controlling  competition  in  the  manufacture  of  pig-iron  to 
any  great  extent.  But  the  rarer  metals,  like  copper,  tin, 
nickel,  and  others,  are  largely  controlled  by  monopolies. 

Now,  while  this  seventh  law  says  nothing  as  to  the  right 
or  wrong,  the  expediency  or  inexpediency  of  the  private 
ownership  of  natural  wealth,  it  does  follow  from  it  that 
this  private  ownership  generally  constitutes  a  monopoly, 
as  we  have  defined  it.  For  of  no  class  of  natural  agents 
is  it  true  that  their  richness  and  availability  are  abso- 
lutely equal.  Those  competitors  who  have  the  richest 
and  best  natural  resources  to  work  with  have  an  advan- 
tage over  their  competitors  which  is  essentially  a  monop- 
oly. Thus  the  owners  of  fertile  lands  near  a  large  city 
have  an  advantage  over  the  owners  of  less  fertile  lands 
far  removed  from  markets,  which  is  of  a  monopolistic 
nature.  If  any  one  doubts  this,  let  him  say  how  this 
case  is  logically  different  from  that  of  the  ownership  of  a 
mine  of  native  copper  so  near  to  New  York  City  that  the 
cost  of  laying  it  down  in  the  market  there  will  be  half 
what  it  is  from  any  existing  mine  ;  or,  for  a  second  case, 
take  the  New  York  Central  railway,  which  has  the  control 
of  such  a  valuable  pathway  between  the  Mississippi  Valley 
and  the  Atlantic  seaboard  that  it  has  an  advantage  over 
all  competitors  in  the  business  of  transportation  between 
those  points. 

We  have  now  to  turn  our  attention  to  other  variations 
in  competition  besides  the  variation  in  intensity.  We 
need  to  distinguish  the  different  species  of  competition. 
That  competition  which  is  in  daily  operation  in  most 


158 


MONOPOLIES  AND  THE  PEOPLE. 


branches  of  industry  we  may  call  actual  competition. 
That  competition  which  would  spring  up  in  any  industry 
in  case  an  increase  in  profits  called  it  out,  we  may  call 
potential  competition.  The  third  class  is  instanced  in  the 
letting  to  the  highest  bidder  a  franchise  for  city  water  or 
gas-works,  or  street-car  lines.  Here  competition  acts  at 
a  single  time  to  fix  the  price  for  perhaps  twenty  years. 
We  may  call  this,  for  want  of  a  better  name,  franchise 
competition.  It  possesses  the  evident  advantage  that  it 
avoids  both  the  waste  of  competition  and  the  fluctuation 
of  prices.  It  has  the  disadvantage  that,  unless  the  owners 
of  the  franchise  are  held  strictly  to  their  contract,  quality 
is  apt  to  be  sacrificed  ;  also  that  if  the  purchase  is  for  a 
term  of  years,  cheapening  in  processes  may  result  in  undue 
profits  to  the  franchise  holders.  The  discussion  of  this 
matter,  however,  does  not  properly  belong  to  this  chapter. 
Arranging  in  their  logical  order  the  laws  of  competition 
which  we  have  found,  we  have  the  following  diagram  : 

(i.)  The  intensity 
of  competition  in- 
creases as  the  num- 
ber of  competing 
units  decreases. 

(2.)  The  intensity 
of    competition    in- 
creases with  the  a- 
mount  of  capital  re- 
quired     for      each 
_  competing  unit. 
(2.)  As   the   num- 
ber    of     competing 
units  decreases. 

(3.)  As  the  amount 
of  capital  required 
for  each  competing 
unit  increases. 

(4.)  As  the  num- 
ber of  available  natu- 
ral agents  decreases. 


c  c 

•~    o 

c  g 

I 

So 
>-. 

a 


(i.)  As  the  waste 
due  to  competition 
increases. 


The  waste  of 
competition  in- 
creases in  pro- 
portion to  its  in- 
tensity. 


THE  LAWS  OF  MODERN  COMPETITION.      159 

The  preceding  diagram  sets  plainly  before  us  the  three 
great  salient  causes  from  which  have  grown  the  long  list 
of  monopolies  under  which  our  civilization  labors.  First, 
the  supply  of  natural  agents  of  which  new  competitors 
in  any  industry  may  avail  themselves  has  been  largely  ex- 
hausted, or  has  been  gathered  up  by  existing  monopolies 
to  render  their  position  more  secure  ;  the  world  has  not 
the  natural  resources  to  develop  that  she  had  a  century 
ago.  Second,  the  concentration  of  all  the  productive  in- 
dustries, except  agriculture,  into  great  establishments, 
while  it  has  enormously  lessened  the  cost  of  produc- 
tion, has  so  reduced  the  number  of  competing  units 
that  a  monopoly  is  the  inevitable  final  result.  Last,  the 
enormous  capital  required  for  the  establishment  and 
maintenance  of  new  competing  units  tends  to  fortify 
the  monopoly  in  its  position  and  render  the  escape  of 
the  public  from  its  grasp  practically  impossible.  These 
terse  statements  contain  exactly  the  kernel  of  potent 
truth  for  which  we  are  seeking  ;  MONOPOLIES  OF  EVERY 

SORT  ARE  AN  INEVITABLE  RESULT   FROM  CERTAIN    CONDI- 
TIONS OF  MODERN  CIVILIZATION. 

The  vital  importance  of  this  truth  cannot  be  over-esti- 
mated. For  so  long  as  we  refuse  to  recognize  it,  so  long 
as  we  attempt  to  stop  the  present  evils  of  monopoly  by 
trying  to  add  a  feeble  one  to  the  number  of  competing 
units,  or  by  trying  to  legislate  against  special  monopolies, 
we  are  only  building  a  temporary  dam  to  shut  out  a  flood 
which  can  only  be  controlled  at  the  fountain  head. 

The  facts  of  history  testify  to  the  truth  of  this  law. 
Monopolies  were  never  so  abundant  as  to-day,  never  so 
powerful,  never  so  threatening  ;  and  with  unimportant 
exceptions  they  have  all  sprung  up  with  our  modern  in- 
dustrial development.  The  last  fifteen  years  have  seen  a 


l6o  MONOPOLIES  AND  THE  PEOPLE. 

greater  industrial  advancement  than  did  the  thirty  preced- 
ing, but  they  have  also  witnessed  a  more  than  proportion- 
ate growth  of  monopolies.  How  worse  than  foolish,  then, 
is  the  short-sightedness  that  ascribes  monopolies  to  the 
personal  wickedness  of  the  men  who  form  them.  It  is 
as  foolish  to  decry  the  wickedness  of  trust  makers  as  it  is 
to  curse  the  schemes  of  labor  monopolists.  Each  is  work- 
ing unconsciously  in  obedience  to  a  natural  law  ;  and  the 
only  reason  that  almost  every  man  is  not  engaged  in 
forming  or  maintaining  a  similar  monopoly  is  that  he  is 
not  placed  in  similar  circumstances.  Away,  then,  with 
the  pessimism  which  declares  that  the  prevalence  of 
monopolies  evidences  the  decay  of  the  nobler  aspirations 
of  humanity.  The  monopolies  of  to-day  are  a  natural 
outgrowth  of  the  laws  of  modern  competition,  and  they 
are  as  actually  a  result  of  the  application  of  steam,  elec- 
tricity, and  machinery  to  the  service  of  man,  as  are  our 
factories  and  railways.  Great  evils  though  they  may  have 
become,  there  is  naught  of  evil  omen  in  them  to  make  us 
fear  for  the  ultimate  welfare  of  our  liberties. 

To  the  practical  mind,  however,  the  question  at  once 
occurs,  what  light  have  we  gained  toward  the  proper 
method  of  counteracting  this  evil  ?  Can  it  be  true  that 
the  conditions  of  modern  civilization  necessitates  our 
subjection  to  monopolies,  and  that  all  our  vaunted  prog- 
ress in  the  arts  of  peace  only  brings  us  nearer  to  an  in- 
evitable and  deplorable  end,  in  which  a  few  holders  of 
the  strongest  monopolies  shall  ride  rough  shod  over  the 
industrial  liberties  of  the  vast  mass  of  humanity  ?  Were 
this  true,  perhaps  we  had  better  take  a  step  backward  ; 
relinquish  the  factory  for  the  workshop,  the  railway 
for  the  stage-coach.  "Better  it  is  to  be  of  an  humble 
spirit  with  the  lowly,  than  to  divide  spoil  with  the  proud." 


THE  LAWS  OF  MODERN  COMPETITION.      l6l 

But  the  law  we  have  found  commits  us  to  no  such  fate. 
We  cannot,  indeed,  abolish  the  causes  of  monopolies 
We  cannot  create  new  gifts  of  Nature,  and  it  would  be 
nonsense  to  attempt  to  bring  about  an  increase  in  the 
number  of  competing  units  and  a  decrease  in  the  capital- 
ization of  each  by  exchanging  our  factories  and  works  of 
to-day  for  the  workshops  of  our  grandfathers.  But 
while  monopolies  are  inevitable,  our  subjection  to  them 
is  not  inevitable  ;  and  when  the  public  once  comes  to 
fully  understand  that  the  remedy  for  the  evils  of  monopoly 
is  not  abolition,  but  control,  we  shall  have  taken  a  great  step 
toward  the  settlement  of  our  existing  social  evils.  To 
discuss  the  details  of  the  remedy,  so  far  as  it  can  be  done 
in  a  volume  of  this  sort,  belongs  properly  to  a  later  chap- 
ter. Before  undertaking  it,  however,  it  seems  well  to 
devote  some  further  attention  to  the  evils  which  the 
attempt  to  abolish  monopolies  and  adhere  to  the  ideal 
system  of  universal  competition  has  brought  upon  us 
and  to  make,  also,  some  further  study  of  the  general 
evils  due  to  monopoly. 


XII. 

THE  EVILS  DUE    TO    MONOPOLY  AND  INTENSE 
COMPETITION. 

IT  is  a  strange  thing  when  we  come  to  analyze  the 
various  social  evils  which  demand  our  attention,  and 
which  every  true  man  longs  to  cure,  to  find  how  great 
a  proportion  can  be  traced  back  to  the  one  great  evil  of 
faulty  competition.  As  a  preliminary  to  a  survey  of  these 
evils,  in  order  that  we  may  understand  the  necessity  that 
all  good  men  and  true  should  exert  themselves  in  apply- 
ing the  remedy,  let  us  see  just  what  conditions  of  our  in- 
dustrial society  we  should  seek  to  work  toward.  What  is 
the  theoretical  perfection  of  human  industry  ? 

Probably  all  thinking  men,  whatever  their  belief  and 
practice,  will  acquiesce  in  the  proposition  that  the  end  we 
should  aim  to  secure  is  "  the  largest  good  to  the  greatest 
number."  As  we  are  discussing  here  only  economic  ques- 
tions, this  means  that  the  end  to  be  sought  is  that  the 
largest  number  of  people  should  have  secured  to  them  the 
greatest  possible  amount  of  the  necessaries  and  comforts 
of  life  ;  or,  more  simply,  that  the  total  of  human  happi- 
ness to  be  derived  from  the  world's  production  of  wealth 
should  be  the  greatest  possible.  Now  for  our  present 
purpose  we  may  assume  that  since  all  men  desire  wealth, 
the  greater  its  production,  the  greater  will  be  the  number 

162 


THE  EVILS  OF  MONOPOLY.  163 

of  human  desires  gratified.  From  this  it  follows  that  our 
social  organization  should  be  such  as  to  increase  to  the 
greatest  possible  degree  the  world's  stock  of  wealth. 

There  is  no  easier  or  safer  way  of  studying  questions 
of  economics  than  to  consider  the  community  as  a  unit, 
and  see  what  is  for  the  interest  of  the  people  as  a  whole  ; 
what  conduces  most  to  the  "  common  wealth  "  ;  and  if 
we  do  this,  whenever  the  question  concerns  production 
alone,  the  task  is  simple,  because  the  interests  of  the 
people  as  a  whole  are  judged  in  the  same  way  as  the  in- 
terests of  a  single  person.  Whatever  tends  to  increase 
the  total  amount  of  wealth  in  the  world,  therefore,  bene- 
fits the  community  as  a  whole  ;  and  whatever  diminishes 
the  supply  is  an  injury.  All  work  of  every  sort  which 
tends  to  aid  in  the  economical  production  of  wealth  and 
its  transfer  to  the  consumer  is  a  benefit  to  the  community  ; 
and  any  thing  which  destroys  wealth,  lessens  its  pro- 
duction, or  hinders  men  from  exerting  themselves  to 
produce  it,  is  an  economic  injury. 

What,  then,  are  we  to  say  of  the  condition  known  as 
over-production  ?  Is  it  not  a  fact  that  some  lines  of  in- 
dustry are  so  overdone  that  the  production  is  far  in 
excess  of  the  demand,  and  is  not  this  an  evil  rather  than 
a  benefit  ?  Do  not  periods  of  business  depression  occur 
when  all  industries  stagnate  for  want  of  a  market  for 
their  goods  ?  The  true  answer  to  this  question  is  :  Over- 
production is  not  a  fault  of  production,  but  of  distribution. 
It  is  true  that,  in  special  industries,  a  surplus  of  produc- 
tion sometimes  occurs,  due  to  over-stimulation,  or  too 
rapid  growth  ;  but  over-production  as  commonly  spoken 
of,  refers  to  a  general  state  of  trade,  in  which  demand  for 
all  sorts  of  goods  seems  to  fall  far  below  the  market 
supply.  But  this  lack  of  demand  is  not  due  to  lack  of 


164  MONOPOLIES  AND  THE  PEOPLE. 

desire.  The  desires  of  men  are  always  in  excess  of  their 
abilities  to  supply  them  ;  it  follows,  therefore,  that  the 
condition  known  as  over-production  consists  in  a  lack  of 
ability  to  purchase  goods  rather  than  in  a  lack  of  desire 
to  purchase  them.  This  lack  of  ability  has  evidently  to 
do  with  the  distribution  of  wealth  rather  than  its  pro- 
duction. 

While  it  is  easy  to  formulate  laws  to  govern  the  the- 
oretically perfect  production  of  wealth,  to  whose  justice  all 
men  will  consent,  we  cannot  go  far  in  the  details  of  the 
ideal  distribution  of  wealth  without  reaching  points  upon 
which  the  views  of  different  parties  are  diametrically 
opposed.  Some  foundation  principles,  however,  let  us 
state,  believing  that  in  their  truth  the  great  majority  of 
men  will  concur. 

In  the  chapter  on  the  theory  of  competition  we  saw 
that,  if  we  conceived  the  results  of  the  labor  of  the  whole 
community  to  be  placed  in  a  common  storehouse  and 
gave  to  each  man  the  right  to  draw  from  it  an  amount 
just  equal  to  the  benefit  derived  from  the  goods  which 
he  had  placed  within  it,  the  ideal  of  a  perfect  system  of 
distribution  of  wealth  would  be  realized.  No  human 
judgment,  however,  is,  or  ever  can  be,  competent  to 
measure  the  exact  industrial  benefits  which  each  person 
confers  upon  the  community  at  large.  We  must  inevita- 
bly permit  men  to  measure  the  result  of  their  own  work 
by  securing  for  it  such  an  amount  of  the  results  of  others' 
work  as  they  can  induce  them  to  give  in  exchange.  But 
while  we  cannot  measure  exactly  the  benefit  which  each 
person  confers,  we  can  see  cases  in  which  the  reward  re- 
ceived is  manifestly  out  of  all  proportion  to  the  benefit 
conferred.  Consider  the  fortunes  which  have  been  ac- 
cumulated by  some  of  our  Midases  of  the  present  decade. 


THE  EVILS  OF  MONOPOLY.  165 

It  is  quite  certain  that  the  benefits  which  Cornelius  Van- 
derbilt,  for  instance,  conferred  on  the  community  by  his 
enterprise  and  business  sagacity,  by  his  work  in  opening 
new  fields  of  industry,  forming  new  channels  for  com- 
merce, etc.,  were  so  valuable  that  he  honestly  earned  the 
right  to  enjoy  a  large  fortune.  It  is  equally  certain  that 
a  great  part  of  his  gains  had  nothing  whatever  to  do  with 
any  benefit  conferred  upon  the  community,  and  that  the 
fortune  of  $100,000,000  or  so  which  he  accumulated  was 
an  example  of  inequitable  distribution  of  the  products 
of  the  world's  industry.  Stating  this  in  the  form  of  a 
general  principle,  we  should  say  :  The  amount  of  wealth 
which  any  man  receives  should  bear  some  approximate  rela- 
tion to  the  benefit  which  he  confers  upon  the  world. 

We  have  already  stated  that,  by  the  law  of  supply  and 
demand,  the  rewards  of  each  worker  are  regulated; in 
theory  even  more  perfectly  in  accordance  with  our  ideas 
of  liberty  than  they  could  be  on  the  basis  of  actual  bene- 
fit conferred.  For  it  is  inconceivable  that  people  would 
submit  to  pay  for  what  was  beneficial  to  them  instead  of 
what  they  desired.  A  man  who  prefers  to  purchase  wines 
instead  of  books  with  his  surplus  money  would  think  it 
a  great  injustice  if  he  were  prevented  from  doing  as  he 
preferred  with  his  own.  But  so  long  as  every  one  is  at 
liberty  to  use  his  income  in  buying  whatever  he  desires 
most,  demand — the  willingness  to  pay  money  for  the 
gratification  of  the  desire — will  exist,  and  so  long  as  de- 
mand exists  it  will  be  met  by  a  supply,  furnished  by 
those  who  are  desirous  of  money  and  what  it  will  bring. 
It  is  inconceivable,  then,  that  any  juster  arrangement 
than  this  law  of  supply  and  demand  can  ever  be  practic- 
able for  regulating  the  compensation  of  each  individual. 
The  man  who  can  drive  a  locomotive  will  receive  larger 


l66  MONOPOLIES  AND  THE  PEOPLE. 

wages  than  the  man  who  shovels  the  earth  to  form  its 
pathway,  because  the  supply  of  men  competent  to  drive 
an  engine  is  small  in  proportion  to  the  number  of  men 
who  are  wanted  for  that  work,  while  almost  any  man  can 
shovel  dirt.  Let  us  state,  then,  for  our  second  principle  : 
The  amount  of  wealth  which  any  man  receives  sJwuld  depend 
on  the  ratio  between  the  demand  which  exists  for  his  services 
and  the  supply  of  tJiose  able  to  render  like  service.  Farther 
than  these  statements  of  the  ideal  principles  governing 
the  economical  production  and  equitable  distribution  of 
wealth  we  need  not  go  at  present. 

Let  us  turn  now  to  examine  the  result  of  a  violation 
of  these  principles  in  some  of  the  crying  evils  of  the 
present  day  which  are  wholly  or  in  part  due  to  the 
growth  of  monopoly  and  the  waste  of  competition. 

Every  candid  man  will  acknowledge  that  the  enor- 
mous congestion  of  wealth  in  a  few  hands  which  exists 
to-day  is  a  danger  to  be  feared.  We  have  had  it  constantly 
dinned  in  our  ears  that  in  this  free  land  the  ups  and 
downs  of  fortune  were  such  that  the  rich  man  of  to-day 
was  apt  to  be  the  beggar  to-morrow  ;  also  that  almost 
invariably  a  rich  man's  sons  were  reckless  spendthrifts. 
These  things,  aided  by  the  abolition  of  primogeniture 
and  entails,  it  was  said,  were  to  prevent  the  growth  of  a 
moneyed  aristocracy  in  this  country.  The  propounders 
of  this  amiable  theory  never  explained  how  the  com- 
munity received  reparation  for  the  destruction  of  wealth 
which  the  spendthrift  sons  were  to  carry  on  ;  but  so 
long  as  the  theory  has  failed  to  work  in  practice,  that 
does  not  matter  so  much. 

A  few  years  ago  it  was  a  favorite  occupation  of  news- 
paper paragraphers  to  estimate  the  Gould  and  Vander- 
bilt  fortunes  ;  but  lately  they  seem  to  have  given  them  up 


THE  EVILS  OF  MONOPOLY.  1 67 

as  beyond  the  limits  of  even  their  robust  guessing  abili- 
ties. Some  idea  of  the  latter's  fortune  may  be  gained, 
however,  by  realizing  the  fact  that  the  Vanderbilt  railway 
system  now  has  a  total  extent  of  nearly  1 2,000  miles,  the 
total  value  of  which  can  hardly  be  less  than  one  thousand 
millions  of  dollars.  Probably  not  less  than  half  of  the 
securities  of  these  companies  are  owned  by  the  Vander- 
bilt family,  and  it  is  well  known  that  their  investments 
are  by  no  means  confined  to  railways.  The  important 
fact  is,  that  this  fortune  grows  so  fast  now  that  it  is  sure 
to  increase ;  and  will  double  itself  every  fifteen  or  twenty 
years,  because  all  that  its  owners  can  spend  is  but  a 
drop  in  the  bucket  toward  using  up  their  income.  But 
this  fortune,  while  the  largest  which  is  still  under  one 
name,  is  but  one  of  many  enormous  ones.  The  names 
of  Gould,  Flagler,  Astor,  Rockefeller,  Stanford,  Hunting- 
ton,  and  a  host  of  others  follow  close  after  the  Vander- 
bilts.  In  the  days  of  our  grandfathers,  millionaires 
were  no  more  plentiful  than  hundred-millionaires  are 
to-day. 

We  have  next  to  show  the  present  and  prospective 
evils  which  result  from  this  congestion  of  wealth.  The 
first  and  most  obvious  one  is  its  injury  to  the  remainder 
of  the  people  of  the  country,  by  the  diversion  from  them 
of  wealth  which  they  have  rightfully  earned  and  which 
they  would  receive  were  it  not  for  the  tax  of  monopoly. 
It  is  obvious  that  a  certain  amount  of  wealth  is  annually 
produced  by  the  industry  of  the  country  from  which  the 
whole  wants  of  the  country  must  be  supplied.  This 
amount  may  be  greater,  indeed,  when  a  Gould  or  a 
Flagler  or  a  Crocker  directs  the  enterprise  ;  but  for  the 
most  part  it  is  indisputable  that  the  owners  of  these 
colossal  fortunes  have  made  them,  not  by  any  stimulus 


168  MONOPOLIES  AND  THE  PEOPLE. 

of  the  production  of  wealth  by  their  owners,  but  by  a 
diversion  of  the  produced  wealth  in  the  general  distribu- 
tion from  others'  pockets  to  their  own.  In  short,  all 
other  men  are  poorer  that  these  many  times  millionaires 
may  be  richer.  To  show  how  these  fortunes  have  in 
many  cases  been  obtained,  I  cannot  do  better  than  to 
quote  a  writer  not  at  all  likely  to  err  by  undue  severity 
to  our  millionaires,  as  he  is  himself  the  president  of  a 
railway  system  a  thousand  miles  in  extent : 

The  great  majority  of  the  phenomenal  fortunes  of  the  day  are  the 
result  of  what  may  be  called  lucky  gambling.  .  .  .  Man  is  a 
gambling  animal  by  nature,  and  modern  methods  have  enormously 
developed  both  its  facilities  and  its  temptations  and  have  opened 
large  fields  in  which  gambling  is  not  held  to  be  disreputable. 

Under  such  stimulus  is  it  wonderful  that  its  growth  has  been  phe- 
nomenal ?  Wall  street  is  its  head-quarters,  and  millions  upon  millions 
of  dollars  are  accumulated  there  to  meet  the  wants  of  the  players. 
Railroad  stocks  are  its  favorite  cards  to  bet  upon,  for  their  valuation 
is  liable  to  constant  fluctuation  on  account  of  weather,  crops,  new- 
combinations,  wars,  strikes,  deaths,  and  legislation.  They  can  also  be 
easily  affected  by  personal  manipulations.  .  .  .  Money  makes 
money,  and  money  in  great  masses  has  its  attractive  power  increased. 
The  aspect  of  phenomenal  fortunes,  therefore,  is  a  social  problem  of 
some  importance.  Their  manner  of  growth  and  their  manner  of  use 
are  to  be  observed,  and  what  restrictions,  if  any,  should  be  placed  on 
their  accumulation  should  be  considered.1 

The  fact  pointed  out  by  General  Alexander  in  the 
above  quotation  is  one  which  is  far  too  lightly  appre- 
ciated. The  evils  of  railway  management  by  which  the 
owners  of  the  stocks  and  bonds  of  the  company  are  vic- 
timized to  enrich  stock  speculators  are  much  too  com- 
plex and  numerous  to  be  described  here.  The  state  of 
affairs  can  be  briefly  summed  up,  however,  with  the  state- 

1 "  Railway  Practice."  By  E.  P.  Alexander,  President  Central  Railroad  and 
Banking  Co.  of  Georgia. 


THE   EVILS  OF  MONOPOLY.  169 

ment  that  our  present  system  of  conducting  corporate 
enterprises  results  inevitably  in  the  gravitation  of  their 
ownership  into  the  hands  of  the  holders  of  large  for- 
tunes. The  railways  of  the  country  are  an  instance  in 
point.  Time  was  when  the  stocks  and  bonds  of  rail- 
ways were  owned  by  people  of  small  means  all  over 
the  country.  But  after  many  severe  lessons  in  the 
shape  of  stocks  wiped  out,  and  bond  interest  scaled 
down,  these  small  holders  were  taught  the  folly  of  in- 
vesting their  savings  in  business  over  which  they  had 
practically  no  control,  and  thus  placing  them  at  the 
mercy  of  irresponsible  corporate  officers.  Broadly  speak- 
ing, the  railway  property  of  the  country  is  owned  by 
men  worth  their  millions  ;  and  the  small  holdings  are 
being  rapidly  absorbed  every  day.  But  the  case  is  not 
true  of  railways  alone.  Telegraph  lines,  telephone,  and 
electric  light  plants,  our  mines,  and  to  a  large  extent  our 
factories,  which  were  once  held  by  private  owners,  are 
now  controlled  by  corporations  whose  shares  are  quoted 
on  the  exchanges  and  are  consequently  subject  to  a 
forced  variation,  dictated  according  as  "bull  "  or  "bear  " 
has  the  ascendency.  And  when  the  ownership  of  a 
property  is  once  brought  into  this  channel,  it  is  no 
longer  a  suitable  investment  for  the  man  of  small  means. 
It  is  the  prey  of  men  who  practically  make  bets  as  to 
what  its  future  price  will  be,  and  manipulate  the  price, 
if  possible,  to  win  their  bets.  If  it  is  ever  again  held  for 
investment  simply,  it  is  when  it  is  locked  in  the  safe  of 
some  modern  Croesus. 

We  have  shown  now  the  extent  to  which  the  congestion 
of  wealth  has  gone.  We  have  shown  that  other  men  are 
poorer  that  these  men  may  be  richer.  We  have  explained 
that  these  great  fortunes  have  been  made,  not  by  legiti- 


MONOPOLIES  AND  THE  PEOPLE. 


mate  enterprise,  but  largely  by  "  lucky  gambling."  And 
finally  we  have  seen  how  the  transfer  of  each  enterprise 
to  the  control  of  stock  speculators  adds  it  eventually  to 
some  already  overgrown  fortune.  The  connection  with 
the  subject  of  the  present  volume  is  obvious.  The  cot- 
ton-seed oil  mills  of  the  South,  once  held  by  private 
owners,  are  now  in  the  hands  of  a  trust  whose  certificates 
are  quoted  on  the  stock-exchanges,  and  are  held  only  by 
men  of  large  capital,  or  by  stock  gamblers.  This  is  a 
typical  example  of  the  change  which  is  everywhere 
occurring.  Private  enterprise  gives  way  to  the  stock 
company,  and  that  in  turn  gives  way  to  the  trust.  The 
salient  fact,  then,  we  may  express  in  similar  terms  to 
those  of  our  first  law  of  competition,  as  follows  :  The 
congestion  of  wealth  tends  to  increase  inversely  with  the  num- 
ber of  competing  units 

The  facts  we  have  stated  make  it  impossible  for  the 
greater  monopolies  to  defend  themselves,  on  the  ground 
that  their  profits  inure  to  the  benefit  of  any  great  number 
of  people.  But  this  is  not  an  innocuous  state  of  affairs. 
It  is  one  of  serious  injustice  and  evil.  The  workman 
who  struggles  hard  to  save  a  hundred  dollars  a  year  can 
receive  only  a  paltry  three  dollars  and  a  half  of  interest 
or  less,  if  he  deposits  it  in  a  saving-bank.  But  the  capital- 
ist who  is  clearing  a  hundred  thousand  a  year  may  make 
twice  or  thrice  that  interest  from  his  investments.  In 
short,  the  charge  is  :  That  monopoly  and  intense  compe- 
tition, with  the  variation  in  price  which  they  cause,  have 
shut  out  the  small  capitalists  of  the  country  from  the 
ownership  of  the  most  profitable  sorts  of  property  ;  and 
by  confining  them  to  other  lines,  have  decreased  their 
possible  income  from  their  investments. 

A  further  evil  resulting  from  the  congestion  of  wealth 


THE  EVILS  OF  MONOPOLY.  I/I 

is  what  is  commonly  spoken  of  as  over-production.  We 
are  confronted  of  late  years  with  the  strange  spectacle  of 
factories  and  mills  shut  down  for  months  at  a  time,  of 
markets  which,  at  various  times,  are  glutted  with  every 
sort  of  commodity.  All  sorts  of  causes  are  given  ;  all 
sorts  of  remedies  are  suggested  and  tried.  Where  is  the 
true  one  ?  With  the  exception  of  a  few  special  cases, 
the  fault  is  not  that  there  are  no  people  who  want  the 
goods.  Probably  ninety-nine  families  out  of  every  hun- 
dred would  buy  more  if  they  had  the  money  to  buy  with. 
In  many  cases  the  lack  of  money  to  buy  with  is  due  to 
the  fact  that  the  bread-winners  are  out  of  employment 
because  of  the  glutted  markets  and  idle  mills.  In  this 
way  the  evil  tends  to  perpetuate  itself  and  grow  worse. 
Now  combine  this  fact  with  the  fact  that  the  holders 
of  monopolies  are  in  the  receipt  of  incomes  so  great  that, 
in  many  cases,  they  are  quite  unable  to  spend  them. 
Also,  that  this  income  is  largely  locked  up  to  wait  the 
chance  of  profitable  investment,  or  is  used  in  speculation. 
Is  it  not  obvious,  now,  that  the  reason  why  people  cannot 
afford  to  purchase  the  goods,  with  which  the  storehouses 
are  glutted,  is  that  too  large  a  proportion  of  profits  has 
been  diverted  to  swell  fortunes  already  enormous  ?  Have 
we  not  in  this  way  accounted  for  a  large  amount,  at  least, 
of  the  over-production  which  is  throwing  out  of  employ- 
ment thousands  of  workmen,  rendering  useless  a  vast 
amount  of  valuable  capital,  and  affecting  from  time  to 
time  the  business  of  the  whole  country  with  a  veritable 
paralysis  ? 

The  facts  bear  out  this  theory.  For,  at  many  times 
when  producers  in  every  industry  are  complaining  of  dull 
times  because  people  who  buy  have  no  money  to  spend, 
there  is  an  abundance  of  money  to  be  had  for  investment. 


1/2  MONOPOLIES  AND  THE  PEOPLE. 

Fortunately,  the  evil  seen  from  this  aspect  must,  to  a  cer- 
tain extent,  be  but  a  temporary  one,  and  will  tend  to 
work  its  own  cure.  For  as  the  world's  stock  of  invested 
wealth  continues  to  grow,  there  is  less  opportunity  for  its 
profitable  investment  in  improving  undeveloped  natural 
resources.  The  greater  portion  of  our  wealth  we  save 
and  invest,  the  faster  will  the  rate  of  interest  tend  down- 
ward. But,  as  this  occurs,  the  operators  of  mills  and 
mines  have  to  pay  less  out  of  their  receipts  as  interest  on 
their  borrowed  capital,  and  can,  therefore,  pay  more  to 
their  workmen. 

There  is  another  way  in  which  monopoly  works  to 
cause  over-production,  with  its  attendant  evils.  Suppose 
a  trust  is  formed  in  some  manufacturing  industry,  where 
the  working  capacity  is  just  equal  to  supplying  the  de- 
mand. The  first  work  of  the  trust  is  to  raise  the  prices 
perhaps  20,  30,  or  40  per  cent.  Of  course  this  causes  a 
falling  off  in  the  demand,  and  the  trust  has  to  shut  down 
some  of  its  mills  to  ward  off  over-production.  The  true 
cause  of  over-production  in  this  case  is,  that  the  prices 
are  not  in  equilibrium  with  the  relation  between  supply 
and  demand.  Let  prices  come  down,  and  the  demand 
will  increase.  The  working  of  this  special  case  gives  us 
an  idea  of  the  way  in  which  general  over-production 
is  caused.  For  it  is  well  known  that  monopolies  have 
raised  the  prices  and  reduced  the  consumption  not  of  one, 
but  of  hundreds  of  articles.  If  the  men  who  are  made 
idle  by  the  over-production  in  these  industries  flock  into 
other  occupations  to  secure  work,  they  reduce  wages 
there  ;  so  that,  in  any  case,  their  purchasing  power  is 
reduced,  and  this  tends  to  perpetuate  and  increase  the 
evil.  Of  course  it  is  not  pretended  to  claim  that  all 
industrial  depressions  have  been  due  to  over-production, 


THE  EVILS  OF  MONOPOLY,  173 

or  the  local  congestion  of  the  world's  income.  But  that 
a  large  part  of  it  may  be  justly  laid  to  this  cause,  seems 
to  be  beyond  question. 

We  have  shown  that  the  congestion  of  wealth  is  very 
largely  due  to  the  growth  of  monopoly,  and  we  have  dis- 
cussed the  more  immediate  evils  that  result  from  this 
congestion  of  wealth.  But  when  we  attempt  to  describe 
the  evils  and  abuses  which  follow  close  after,  as  a  result 
of  the  power  which  monopoly  has  placed  in  the  hands  of 
a  few,  we  may  well  pause  at  the  task.  The  whole  array 
of  perplexing  social  problems  comes  before  us,  and  we 
realize  more  and  more  what  a  curse  monopoly  has 
become.  The  philanthropist  tells  us  that  poverty,  and 
all  the  distresses  that  follow  in  its  wake,  are  largely  due 
to  the  fact  that  our  workingmen  under  present  condi- 
tions must  live  from  hand  to  mouth,  must  rely  on  charity 
for  aid  in  every  emergency,  and  must,  therefore,  decrease 
in  manliness  and  self-reliance  and  the  ambition  to  better 
themselves,  as  the  practical  impossibility  of  success  is 
comprehended. 

Good  men  are  lamenting  because  the  Church  has,  to  a 
great  degree,  lost  its  hold  on  the  laboring  classes,  and  are 
casting  about  on  all  sides  for  a  remedy.  Will  they  ever 
find  one  as  long  as  the  wage-worker  carries  in  his  bosom 
a  rankling  sense  of  injury  done  him  ?  Injury  which  he 
feels  that  the  Church  is  merely  seeking  to  drug  with 
charity  instead  of  wishing  to  cure  it  with  justice  ?  There 
is  great  need  that  the  Church,  not  alone  by  the  sermons 
of  its  most  enlightened  thinkers,  like  Dr.  Heber  Newton, 
but  by  the  daily  practice  of  the  rank  and  file  of  its  member- 
ship, should  recognize,  as  it  never  yet  has  done,  the  great 
principles  of  human  fraternity,  and  move  intelligently 
and  earnestly  to  remedy  the  great  evils  that  menace  us. 


174  MONOPOLIES  AND  THE  PEOPLE. 

Even  the  evil  of  intemperance  can  be  traced  back  to  a 
connection  with  monopoly.  Who  shall  blame  the  tired 
laborer,  if  after  a  week  with  sixty  hours  of  unremitting 
toil,  he  takes  refuge  from  the  dreariness  and  lassitude 
of  physical  exhaustion,  the  hopelessness  of  ambition- 
quenced  life,  and  perhaps  the  discomforts  and  disquiet 
of  the  place  he  calls  home,  in  a  long  draught  of  that 
which  does,  for  the  time,  create  in  him  an  image  of 
exhilaration,  strength,  self-respect,  and  manhood  ?  It  is 
but  an  image,  indeed,  and  to  all  but  the  victim  it  is  a 
caricature  ;  but  when  a  man  cannot  hope  for  the  reality, 
to  only  imagine  for  a  brief  hour  that  he  is  indeed  a  king 
of  men,  and  that  care  and  woe  and  degradation  are  no 
longer  his  lot,  is  a  refuge  not  to  be  despised. 

There  is  indeed  a  class  of  philanthropists  who  say, 
with  some  truth,  that  the  laboring  classes  as  a  whole 
have  now  more  than  they  will  spend  for  their  own  good, 
and  declare  that  higher  wages  means  merely  more  spent 
on  sprees  and  debasing  sports,  of  different  sorts  but  uni- 
versally harmful.  On  the  other  side,  the  wise  philan- 
thropists who  are  trying  to  help  their  fellow-men  in  that 
best  of  all  ways,  by  teaching  them  to  rely  on  themselves, 
testify  that  their  efforts  to  make  men  independent  are 
largely  hampered  because  it  is  so  extremely  difficult  for 
a  workingman  to  live  in  any  other  way  than  from  hand 
to  mouth,  especially  in  our  large  cities.  The  true  solu- 
tion seems  to  be  that  all  these  reforms  must  go  hand  in 
hand.  We  must  teach  men  how  to  make  nobler  uses  of 
their  incomes  and  themselves,  while  we  endeavor  to  bring 
about  reforms  that  shall  give  them  greater  comforts  and 
more  leisure  to  use  for  either  self-improvement  or  self- 
debasement. 

Much  more  might  be  said  of  the  indirect  effects  which 


THE  EVILS  OF  MONOPOLY.  175 

result  from  the  taxation  which  monopolies  inflict  upon 
the  community  for  their  own  profit  ;  but  they  are  now  so 
generally  realized  and  understood  that  we  can  devote 
our  time  more  profitably  to  the  investigation  of  other 
evils. 

Under  the  ideal  system  of  competition  which  we 
studied  in  Chapter  X.,  we  found  that  all  occupations 
were  competing  with  each  other ;  so  that  if,  from  any 
cause,  one  calling  became  especially  profitable,  men 
would  flock  to  it  and  bring  down  the  profits  to  a  normal 
point.  Monopolies  have  seriously  interfered  with  this 
important  and  beneficent  law.  How  often  do  we  hear 
the  complaint  of  the  great  difficulties  that  beset  young 
men  on  their  first  entrance  to  business  or  industrial  life 
in  securing  a  situation.  The  monopolized  industries 
shut  out  new  competitors  by  every  means  in  their  power. 
The  trade-unions  limit  the  number  of  apprentices  which 
shall  be  allowed  to  learn  their  trade  each  year.  The 
result  is,  first,  a  most  deplorable  tendency  to  idleness  on 
the  part  of  young  men  just  at  the  time  when  they  should 
be  most  active  ;  and,  second,  a  still  larger  increase  of 
men  in  the  professions  and  non-monopolized  callings, 
tending  to  still  further  increase  the  competition  in  those 
callings,  where  returns  are  already  inferior  to  what  they 
should  be.  Surely,  we  must  begin  to  appreciate  how 
vitally  important  to  every  person  in  the  land  is  this 
matter  of  competition  and  monopoly. 

.  The  evils  which  we  have  thus  far  considered  pertain  to 
the  distribution  of  wealth.  Let  us  now  turn  our  attention 
to  the  production  of  wealth.  Our  second  law  of  compe- 
tition stated  that  the  waste  due  to  competition  varied 
directly  as  its  intensity.  We  have  frequently  referred  to 
this  waste  of  competition  ;  let  us  now  inquire  more  fully 


176  MONOPOLIES  AND  THE  PEOPLE. 

concerning  its  amount  and  effect.  In  the  first  place, 
however,  let  us  settle  the  question,  once  for  all,  that 
waste  or  destruction  of  wealth  of  any  sort  is  an  economic 
injury  to  the  community.  We  have,  indeed,  already  ex- 
plained this  in  the  first  paragraphs  of  the  chapter ; 
but  while  all  authorities  on  economics  agree  on  this 
point,  the  general  public  is  still  seriously  infected  with 
the  fallacy  that  waste,  destruction,  and  unprofitable 
enterprises  are  beneficial  because  they  furnish  employ- 
ment to  labor.  If  this  were  merely  a  theory,  we  could 
afford  to  ignore  it ;  but  the  trouble  is  that  it  is  acted 
upon,  and  works  untold  evil  and  damage  to  the  world. 
To  take  a  typical  case,  people  reason  that  damage  done 
by  flood  or  fire  or  storm  is  not  a  total  loss  because 
employment  will  be  furnished  to  many  in  repairing  and 
rebuilding  after  the  devastation.  They  do  not  stop  to 
reflect  that  so  much  wealth  has  been  wiped  out  of  the 
world,  and  that  instead  of  the  destruction  furnishing  so 
much  additional  employment,  it  has  only  changed  the  direction 
of  the  employment.  For  money  nowadays  is  always  spent, 
either  directly,  by  its  owners,  or  by  some  one  to  whom  he 
lends  it.  And  wherever  money  is  spent  it  furnishes 
employment.  Therefore,  if  the  money  which  was  used 
in  repairing  and  rebuilding  had  not  been  required  for 
that  work,  it  would  have  been  spent  in  some  other  direc- 
tion and  furnished  employment  to  labor  there.  Under- 
standing, then,  that  the  economic  interests  of  the  com- 
munity are  best  served  when  each  one  of  its  members 
exerts  his  energies  with  the  greatest  result  and  with  the 
least  waste  in  producing  wealth,  let  us  see  to  what  extent 
intense  competition  and  monopolies  have  violated  this 
law. 

In   his  interesting   book  entitled   "  Questions  of  the 


THE  EVILS  OF  MONOPOLY.  177 

Day,"  Prof.  Richard  T.  Ely,  of  Johns  Hopkins  Uni- 
versity, refers  to  the  building  of  two  great  railways  with 
closely  paralleled  roads  already  in  operation,  the  Nickel 
Plate,  and  the  New  York,  West  Shore  and  Buffalo,  and 
says  : 

"  It  is  estimated  that  the  money  wasted  by  these  two  single  attempts 
at  competition  amounts  to  % 200,000,000.  Let  the  reader  reflect  for  a 
moment  what  this  means.  It  will  be  admitted  that,  taking  city  and 
country  together,  comfortable  homes  can  be  constructed  for  an  aver- 
age of  $r,ooo  each.  Two  hundred  thousand  homes  could  be  con- 
structed for  the  sum  wasted,  and  two  hundred  thousand  homes  means 
homes  for  one  million  people.  I  suppose  it  is  a  very  moderate  esti- 
mate to  place  the  amount  wasted  in  the  construction  of  useless  rail- 
roads at  $1,000,000,000,  which,  on  the  basis  of  our  previous  calcula- 
tions, would  construct  homes  for  five  millions  of  people.  But  this  is 
probably  altogether  too  small  an  estimate  of  even  the  direct  waste 
resulting  from  the  application  of  a  faulty  political  economy  to  practi- 
cal life.  When  the  indirect  losses  are  added,  the  result  is  something 
astounding,  for  the  expense  of  a  needless  number  of  trains  and  of 
what  would  otherwise  be  an  excessively  large  permanent  force  of  em- 
ploye's must  be  added.  Of  course,  nothing  much  better  than  guess- 
work is  possible,  but  I  believe  that  the  total  loss  would  be  sufficient 
to  provide  a  greater  portion  of  the  people  of  the  United  States  with 
homes." 

But  it  seems  quite  possible  to  make  a  closer  estimate 
of  the  wealth  wasted  by  the  construction  of  unneeded 
railways  than  the  general  one  above.  There  are  now,  in 
round  numbers,  158,000  miles  of  railway  in  the  United 
States.  The  two  lines  named  above  have  a  total  extent  of 
nearly  1,000  miles  ;  and  while  they  are  the  most  flagrant 
examples  of  paralleling  in  the  country,  there  is  no 
small  number  of  other  roads  in  various  parts  of  the 
country  which,  except  for  their  competition  with  roads 
already  constructed,  would  never  have  been  built.  Con- 
sidering the  fact  that  the  paralleling  has  been  done  in 


178  MONOPOLIES  AND  THE  PEOPLE. 

regions  where  the  traffic  was  heaviest  and  where  the  cost 
of  construction  was  greatest,  it  seems  a  conservative  esti- 
mate to  say  that  5  per  cent,  of  the  capital  invested  in 
railways  in  the  United  States  has  been  spent  in  parallel- 
ing existing  roads.  But  the  total  capital  invested  in 
the  railways  of  the  United  States  is  about  $9,200,000,000, 
5  per  cent,  of  which  is  $460,000,000.  It  is  also  to  be 
remembered  that  this  7,500  miles  of  needless  road  has  to 
be  maintained  and  operated  at  an  average  expense  per 
mile  per  annum  of  $4,381,  or  a  total  annual  cost  of 
nearly  $33,000,000.  Taking  Prof.  Ely's  estimate  of 
$1,000  as  the  cost  at  which  an  average  size  family  can  be 
provided  with  a  comfortable  home,  and  we  find  that  the 
cost  of  these  unneeded  railways  would  have  provided  460,- 
ooo  homes,  sufficient  to  accomodate  2,300,000  people.  Say 
that  3  per  cent,  of  the  cost  of  these  homes  is  required 
annually  to  keep  them  in  repair,  then  this  could  be  fur- 
nished by  the  $33,000,000  now  paid  for  the  operating 
expenses  of  needless  railways,  and  an  annual  margin  of 
about  $19,000,000  would  be  left,  or  enough  to  provide 
each  year  homes  for  nearly  100,000  more  people  in 
addition.  Of  course,  this  is  merely  a  concrete  example 
of  what  possible  benefits  we  have  been  deprived  by 
wasting  our  money  in  building  needless  railways. 

As  a  matter  of  fact,  the  money  we  have  spent  on  un- 
profitable railways,  as  well  as  those  totally  useless,  has 
wrought  us  an  amount  of  damage  far  in  excess  of  their 
actual  cost.  It  is  generally  agreed  by  financiers  that  the 
periods  of  industrial  depression  during  the  past  score  of 
years  have  been  largely  due  to  excessive  railway  building. 
For  in  a  period  of  active  railway  construction,  roads  are 
built  whose  only  excuse  for  existence  is  that  they 
will  encroach  upon  the  territory  of  some  rival.  The 


THE   EVILS  OF  MONOPOLY.  179 

capital  invested  fails  to  make  a  return.  The  loss  of 
income  which  ensues  decreases  the  purchasing  power  of 
the  community  ;  and  this  combines  with  the  sudden  loss 
of  business  confidence  caused  by  the  failure  of  the  enter- 
prise to  bring  about  a  general  panic  and  crash  which 
affects  the  whole  community  ;  and  by  checking  enter- 
prise and  industry,  damages  the  country  ten  times  the 
amount  of  the  original  loss. 

The  waste  of  competition  is  by  no  means  confined  to 
railways.  The  Sugar  Refiners'  trust  has  raised  the  price 
of  sugar  and  thus  reduced  its  consumption  so  much  that 
they  have  permanently  closed  several  of  their  factories. 
Yet  Glaus  Spreckels  is  now  building  a  great  refinery  in 
Philadelphia,  the  output  of  which  is  to  compete  with  the 
trust.  All  this  capital  invested  in  that  which  is  not 
needed  by  the  community  is  an  injury  to  the  public.  The 
French  Copper  syndicate  so  raised  the  price  of  copper 
that  it  became  profitable  to  work  old  mines  of  poor  ore, 
which  under  ordinary  circumstances  could  not  be 
worked  at  all  at  a  profit.  Capital  was  expended  in 
opening  and  refitting  these  mines,  and  in  preparing  them 
for  working ;  while  other  mines,  able  to  produce  the 
metal  at  much  less  cost,  were  reducing  their  output 
because  of  their  contract  with  the  trust. 

In  various  cities  of  the  country,  millions  have  been 
wasted  in  tearing  up  the  streets  to  bury  the  unneeded 
mains  of  competing  gas  companies.  The  electric  light 
competitors  are  stringing  their  wires  over  our  heads  and 
beneath  our  feet,  and  by  covering  the  same  district  twice 
or  three  times,  double  and  treble  the  attendant  evils  as 
well  as  the  cost. 

The  waste  due  to  intense  competition  in  trade  may  be 
avoidable  or  unavoidable  ;  but  it  is  certainly  of  enor- 


ISO  MONOPOLIES  AND  THE  PEOPLE. 

mous  magnitude,  although  the  fact  of  its  being  a  waste  is 
still  little  appreciated. 

The  waste  due  to  labor  monopolies  is  much  better 
understood.  The  strikes  which  paralyze  industry  and 
send  want  and  distress  in  ever  widening  circles  are 
universally  recognized  to  be  a  waste  of  wealth  whose 
annual  amount  is  enormous.  The  cost  to  employers  and 
workmen  of  the  strikes  in  the  State  of  New  York  in 
1886  and  1887,  was  $8,507,449.  Reckoning  from  this  as  a 
basis,  it  is  probable  that  the  total  annual  cash  cost  of  strikes 
in  the  United  States  is  twenty  or  twenty-five  million  dol- 
lars. The  results  of  these  strikes  in  decreasing  the  purchas- 
ing power  of  employes  and  thus  causing  overproduction, 
and  in  discouraging  enterprise  and  increasing  the  cost  of 
capital,  serve  to  spread  their  effect  throughout  the  whole 
industrial  community  and  thus  cause  an  actual  loss  and 
injury  many  times  that  borne  by  the  parties  directly 
engaged. 

It  is  thus  evident  that  the  waste  due  to  the  intense 
competition  which  the  concentration  of  productive  enter- 
prise has  brought  about  in  modern  times  is  a  matter  of 
startling  proportions.  We  are  wasting  and  destroying 
wealth  all  the  time  sufficient  to  go  a  long  way  towards 
abolishing  all  the  poverty  in  our  midst  ;  and  the  blame 
for  this  state  of  affairs  we  are  now  able  to  place  where  it 
belongs. 

Surely  with  a  full  appreciation  of  these  evils,  every 
honest  and  patriotic  man  must  be  willing  to  use  every  en- 
deavor to  strike  at  the  root  of  the  evil.  The  public  indeed 
is,  and  has  long  been,  a  unit  in  its  opposition  to  monopoly  ; 
but  in  endeavoring  to  defeat  monopoly  it  has  taken  just 
the  course  which  could  give  no  permanent  gain.  Cities 
have  beggared  themselves  to  aid  competing  railway  lines 


THE  EVILS  OF  MONOPOLY.  l8l 

only  to  see  them  consolidated  eventually  with  the  monop- 
oly which  it  was  expected  to  defeat.  The  multitude 
regard  Claus  Spreckels  as  a  benefactor — and  will  till  he 
forces  the  Sugar  Trust  to  divide  their  25  per  cent,  profits 
with  him  in  return  for  the  control  of  his  refinery. 

It  is  no  benefit  to  us  if  in  steering  away  from  the 
Scylla  of  monopoly,  we  be  wrecked  on  the  Charybdis  of 
wasteful  competition.  We  have  been  trying  for  a  score 
of  years  now  to  defeat  monopolies  by  creating  competi- 
tion ;  but  in  spite  of  a  universal  public  sentiment  in 
favor  of  the  reform,  and  notwithstanding  the  millions  of 
wealth  which  we  have  poured  out  like  water  to  accom- 
plish this  object,  monopolies  to-day  are  far  more 
numerous  and  powerful  than  ever  before.  The  people 
who  are  groaning  under  their  burden  of  oppression  are 
anxious  for  relief.  The  remedy  they  have  so  long  and 
faithfully  tried  to  apply  has  but  made  a  bad  matter 
worse  ;  and  it  is  small  wonder  that,  despairing  of  other 
relief,  they  are  adopting  false  and  injurious  plans  for 
bettering  themselves  which  serve  merely  to  extend  the 
monopoly  policy  into  all  industrial  affairs. 

We  are  threatened  with  a  state  of  society  in  which  most 
of  the  principal  industries  will  be  wholly  given  over  to 
monopoly.  Those  in  each  occupation  will  band  together 
to  secure  the  greatest  returns  for  themselves  at  the 
expense  of  all  other  men  ;  while  the  few  occupations 
which  cannot  thus  combine  in  a  monopoly — farming,  and 
the  different  sorts  of  unskilled  labor — will  be  filled  to 
overflowing  with  those  crowded  out  of  other  callings. 
Those  who  follow  them  will  do  so  only  because  the 
monopolized  occupations  are  closed  to  them.  Thus  will 
our  farming  population  degenerate  into  a  peasantry  more 
miserable  than  that  of  Europe,  and  our  laborers  be 


1 82  MONOPOLIES  AND  THE  PEOPLE. 

ground  down  to  a  level  lower  than  they  have  yet  known. 
Is  there  a  probability  that  such  a  state  of  affairs  will 
come  to  pass  ?  There  might  be  if  the  public  were  not 
keenly  alive  to  the  curse  of  monopoly.  But  as  it  is,  the 
greater  danger  is  that  through  ignorance  a  wrong  course 
may  be  adopted  for  the  cure  of  our  present  evils,  which 
will  aggravate  instead  of  curing  them. 


XIII. 

AMELIORATING  INFLUENCES. 

Ir  pure  selfishness  were  the  only  motive  influencing 
the  masses  of  mankind,  the  evils  which  we  have  consid- 
ered in  the  preceding  chapter  would  be  wholly  unbeara- 
ble. All  men  would  be  waging  an  industrial  warfare 
with  each  other  in  their  greed  for  gain,  just  as  the  barons 
of  feudal  times  fought  to  satisfy  their  thirst  for  power 
and  possessions  ;  and  as  motive  is  the  great  force  which 
determines  character,  we  should  be,  as  far  as  moral 
excellence  is  concerned,  in  the  same  category  as  the 
uncivilized  savages. 

Fortunately  for  the  happiness  of  the  race,  there  are 
important  influences  at  work  counteracting,  modifying 
and  ameliorating  the  social  evils  that  threaten  us. 
These  influences  are  not  cures  for  these  evils,  though 
they  are  so  considered  by  very  many  people.  But  they 
are  very  important  palliatives.  They  are  certainly  of 
inestimable  value  in  the  lack  of  real  remedies  ;  but  it  is 
better  to  consider  them  as  palliatives  merely ;  for 
necessary,  as  they  are  and  always  will  be,  to  soften  and 
relieve  the  ruggedness  of  human  laws  and  human  admin- 
istration of  law,  in  the  present  condition  of  humanity  they 
cannot  effect  a  cure  of  the  evils  which  burden  us. 

The  first  of  these  palliatives  has  a  purely  selfish  origin. 
It  arises  from  the  desire  of  the  managers  of  every 

183 


184  MONOPOLIES  AND  THE  PEOPLE. 

monopoly  to  make  the  greatest  possible  profit  from  its 
operations.  Let  us  take,  for  example,  a  street  railway 
monopoly  which  is  at  liberty  to  charge  such  rates  of  fare 
as  it  chooses  and  which  has  no  competitors.  If  it  fixes 
its  fare  at  10  cents,  very  many  people  will  prefer  to  walk 
or  take  some  other  mode  of  conveyance,  who,  if  the  fare 
were  at  5  cents,  would  patronize  the  road.  Thus  it  may 
very  likely  happen  that  5 -cent  fares  will  yield  it  the 
greatest  net  income.  It  is  often  said  that  it  is  competi- 
tion which  has  brought  our  rates  of  railroad  transporta- 
tion down  to  their  present  low  point.  While  this  is  largely 
true,  it  is  also  true  that  the  tendency  to  foster  the 
growth  of  traffic  by  making  a  low  tariff  has  been  a  large 
factor  in  bringing  rates  down  to  a  reasonable  point. 
Another  example  of  this  principle's  operation  is  in  the 
case  of  monopolies  protected  by  the  patent  laws.  In  this 
case  the  collection  of  only  a  moderate  royalty  will 
generally  result  in  greater  profits  to  the  inventor  than  he 
would  secure  by  exacting  a  large  fee,  because  of  the 
greatly  increased  sales  in  the  former  case. 

It  should  not  be  understood,  however,  that  this 
principle  has  its  only  application  in  cases  similar  to  the 
two  mentioned.  There  is  hardly  an  industry,  monopo- 
lized or  competitive,  into  which  it  does  not  enter  to  effect 
important  results.  It  is  to  be  noted,  however,  that  it  is 
least  effective  where  the  demand  for  the  monopolized 
article  is  least  sensitive  to  a  variation  in  price.  This  fact 
should  be  considered  by  those  who  are  fond  of  arguing 
that  this  principle  alone  is  always  sufficient  to  prevent 
monopolies  from  doing  much  harm.  While  it  is  powerful 
in  the  case  of  such  monopolies  as  we  have  mentioned, 
where  the  demand  for  the  commodity  furnished  varies 
greatly  with  the  price,  in  the  case  of  the  great  copper 


AMELIORATING  INFLUENCES.  185 

trust  or  of  the  quinine  trust  or  of  any  monopoly  control- 
ling the  great  staples  of  human  consumption,  it  seems 
plain  that  it  can  have  little  effect.  Nor  do  we  need  to 
base  our  proof  that  this  principle  is  not  a  sufficient 
remedy  upon  this  ground  alone.  Grant  it  to  be  true  that 
a  certain  monopoly  makes  the  greatest  net  profit  when  its 
rates  or  prices  are  at  a  certain  point  ;  then  will  it  not  be 
apt  to  set  them  slightly  above  that  point,  where  they  will 
give  nearly  the  same  profit  with  a  considerable  decrease 
in  the  volume  of  business  transacted  and  in  the  corre- 
sponding labor  and  responsibility  ?  And,  again,  the 
point  where  it  makes  the  greatest  net  profit  is  considera- 
bly above  the  point  where  it  is  of  the  greatest  possible 
benefit  to  the  community  at  large.  This  latter  end  is 
attained  when  it  uses  its  facilities  to  their  full  capacity 
for  the  benefit  of  the  public.  The  rates  should  be  fixed 
at  such  a  point  that  this  full  capacity  will  be  utilized,  or 
as  much  higher  as  may  be  necessary  to  pay  the  monopoly 
a  fair  profit  on  its  operations. 

This  influence  just  considered  has  its  origin  in  the 
selfishness  of  men.  The  second,  and  by  far  the  most 
important  influence  tending  to  ameliorate  the  evils  due  to 
monopolies  and  intense  competition  arises  from  that 
essentially  noble  trait  of  human  character  whose  province 
it  is  to  seek  the  welfare  of  others  before  that  of  self.  It 
is  not  to  be  wondered  at  that  the  large  benevolence  of 
our  noblest  Christian  thinkers  rebels  against  the  inflexi- 
ble laws  of  competition,  or  rather  at  their  stern  applica- 
tion to  modern  conditions  of  life.  Under  our  social 
system,  indeed,  each  man  is  striving  to  do  his  utmost  to 
benefit  his  fellow-men,  but  only  so  far  as  it  benefits 
himself.  Christianity  goes  far  beyond  this.  It  teaches 
the  Fraternity  of  Man,  the  Fatherhood  of  God,  and  thus 


1 86  MONOPOLIES  AND  THE  PEOPLE. 

the  duty  of  all  men  to  care  for  and  love  their  brothers' 
happiness  and  welfare.  It  is  in  accord  with  the  noblest 
and  most  exalted  desires  of  the  human  soul.  It  teaches 
a  man  to  seek  to  benefit  others  for  their  own  sake,  not 
for  the  sake  of  the  reflex  benefit  on  himself. 

The  burden  of  Christ's  sermon  on  the  mount  was  that 
golden  rule  of  action,  "  Whatsoever  ye  would  that  men 
should  do  to  you,  do  ye  even  so  to  them "  ;  and  the 
whole  of  his  teachings  glow  with  the  spirit  of  fraternity  ; 
the  strong  bearing  the  burdens  of  the  weak  ;  the  rich 
cast  down  and  the  poor  exalted  ;  brother  sharing  with 
brother,  according  to  their  needs.  We  are  accustomed 
to  make  ourselves  complaisant  with  the  reflection  that 
these  were  figurative  expressions,  and  not  meant  as 
literal  commands.  But  if  we  consider  candidly,  we 
must  confess  that  if  it  is  the  spirit  of  its  Master's  com- 
mands which  the  Church  means  to  follow,  it  is  very  far, 
as  a  body,  from  reaching  up  to  their  full  import.  The 
love  for  one's  fellow-men  which  Christ  taught  was  cer- 
tainly meant  to  be  expressed  in  great,  noble  acts  of 
brotherly  kindness.  Consider  the  want,  the  suffering, 
the  distress,  the  misfortune,  the  inequality  by  which  a 
thousand  families  have  hard  work  and  scanty  fare  while 
one  revels  in  luxury.  Are  these  thing  repugnant  to  the 
spirit  of  Christianity,  or  not  ?  Every  one  knows  that 
they  are.  It  is  because  Christian  men  in  these  days  are 
prone  to  follow  their  own  ease  in  common  with  the  rest 
of  the  world,  and  are  accustomed  to  make  their  Christian 
code  of  morals  to  fit  that  which  public  opinion  declares 
to  be  sufficiently  advanced,  that  Christianity  as  a  remedy 
for  social  evils  has  fallen  into  disrepute  with  the  laboring 
classes.  But  men,  both  in  and  out  of  the  Church,  who 
are  better  informed  as  to  the  grand  and  noble  spirit  that 


AMELIORATING  INFLUENCES.  l8/ 

lies  at  its  foundation,  are  coming  to  look  more  and  more 
toward  Christianity  as  the  only  deliverance  from  the 
evils  that  threaten  us. 

Our  social  system,  say  the  devout  among  these  men,  is 
based  on  the  selfish  desires  of  men,  their  wish  to  get  the 
most  for  themselves  with  the  least  service  to  their  fellow- 
men.  It  is  inconceivable  that  a  system  founded  on  any 
thing  less  than  the  noblest  attributes  of  humanity  can  be 
intended  as  a  permanent  basis  for  society.  The  system 
founded  on  competition  was  adapted  to  the  conditions 
of  men  during  the  formative  period  of  civilization  :  but 
modern  inventions,  processes,  and  methods  are  revealing 
a  strange  want  of  elasticity  in  its  action.  It  is  leading  us 
to  such  grave  evils  that  men  everywhere  are  looking  for 
an  escape  from  it.  We  are  brought  face  to  face  with  the 
fact  that  the  law  of  competition,  the  cruelly  terse  "  sur- 
vival of  the  fittest,"  was  never  meant  to  control  the 
wondrously  intricate  relations  of  the  men  of  the  coming 
centuries.  And  if  selfishness  is  not  to  control,  it  is 
because  unselfishness  is  to  •  reign  in  its  stead.  It  is 
because  there  will  grow  up  in  the  hearts  of  men  a  frater- 
nal love,  such  as  the  world  has  not  yet  seen,  which  will 
make  them  gladly  share  a  common  inheritance  with  each 
other,  as  they  do  a  common  Fatherhood.  Men  will  then 
labor  for  others'  welfare  as  now  ;  but  each  with  the 
thought  of  others'  benefit,  not  of  his  own. 

Nor  are  these  men  alone  in  their  belief.  Earnest 
thinkers  outside  of  the  Church,  who  are  familiar  with  the 
evils  which  intense  competition  and  extortionate  monop- 
oly are  constantly  pushing  into  our  notice,  discern  a 
tendency  in  our  social  organism  to  pulsate  with  stronger 
and  more  rapid  beats  in  its  convulsions  of  strike  and 
boycott  and  commercial  crisis.  And  in  these  mighty 


1 88  MONOPOLIES  AND  THE  PEOPLE. 

vibrations,  like  the  swing  of  a  gigantic  pendulum,  there 
is  danger  that  it  may  swing  so  hard  and  so  far  as  to  break 
its  controlling  bonds  and  leave  humanity  in  chaos. 

Anarchy  means  more  than  the  reign  of  individualism. 
It  means  such  a  ruin  of  the  world's  wealth,  the  store- 
houses and  fields  and  factories  which  supply  its  wants, 
that  nine  tenths  of  the  population  of  the  globe  would  be 
swept  off  its  face  by  actual  starvation.  Some  social 
organism  there  must  be  if  our  civilization  is  to  continue. 
What  can  adjust  the  delicate  relations  of  man  to  man 
when  the  bond  of  selfishness  which  holds  us  together 
breaks  ?  There  are  many  men,  even  now,  whose  greatest 
desire  and  strongest  purpose  is  to  benefit  their  fellow- 
men  ;  and  if  we  can  extend  and  strengthen  this  noble 
principle  so  that  it  will  govern  the  great  mass  of  humanity, 
why  may  we  not  cease  to  measure  and  bargain  and 
weigh  with  our  brother  men  ? 

Such  is  the  argument  for  what  we  may  appropriately 
call  Christian  communism.  Who  shall  say  what  shall  be 
possible  with  a  new  and  nobler  generation  of  men  ? 
When  the  great  mass  of  the  race  has  Altruism  for  its 
governing  motive,  then  it  may  be  possible  to  use  that 
trait  of  character  as  the  basis  of  industrial  society.  But 
to-day  the  governing  motives  of  mankind  are  largely 
selfish.  Society  must  govern  men  in  their  dealings  with 
each  other,  not  by  arbitrary  force  but  by  their  inner 
motives  of  action.  When  men  at  large  begin  to  heartily 
desire  to  benefit  others  more  than  themselves,  then  the  sys- 
tem of  selfish  competition  will  begin  to  disappear,  and  the 
system  of  fraternal  devotion  will  arise  to  take  its  place. 
This  will  come  about  naturally.  It  will  be  an  effect 
which  can  only  be  brought  about  by  producing  the  cause. 
When  Christianity  shall  have  so  regenerated  mankind  that 


AMELIORATING  INFLUENCES.  189 

its  governing  motives  are  noble  and  generous,  then  the 
social  problems  \ve  are  discussing,  as  well  as  many  others, 
will  be  forever  happily  solved. 

Every  one  will  say,  God  speed  the  attempt  to  implant 
such  noble  motives  in  the  breasts  of  men ;  but  we  recog- 
nize at  the  same  time  the  vast  change  which  must  be 
wrought  before  mankind  at  large  will  reach  this  high 
standard  ;  and  in  the  centuries  which  will  be  required  to 
effect  this,  we  must  have  other  forces  to  govern  society. 
Thus,  while  not  denying  the  possibility  that  the  Christian 
principle  of  Altruism  may  be  the  final  solution  of  the 
problem  of  society,  it  seems  best  for  us  to  regard  it  at 
the  present  day  as  what  it  is, — an  influence  tending  to 
smooth  over  the  inequalities  and  soften  the  asperities  of 
our  social  system,  and  to  transform  the  warfare  of  com- 
petition into  a  peaceable  and  friendly  emulation. 

It  is  not  easy  to  overestimate  the  valuable  work  which 
this  Christian  principle  of  human  fraternity  is  thus  doing 
at  the  present  day.  It  is  recognized  in  many  ways  so 
common  that  we  cease  to  think  of  them  as  what  they  are 
— expressions  of  the  common  brotherhood  of  man.  Our 
vast  public  charities  supported  by  law  are  an  instance. 
It  is  recognized  now  by  all  civilized  countries  that  it  is  a 
duty  for  the  State  to  care  for  those  who  are  so  poor  or 
unfortunate  as  to  be  unable  to  care  for  themselves. 
Private  charities,  too,  are  as  much  more  enormous  now 
than  they  were  a  century  ago  as  private  fortunes  are, 
compared  with  those  of  that  day.  In  fact,  beneficence 
has  come  to  be  recognized  as  an  important  duty  of  the 
very  wealthy  ;  and  churches,  schools,  hospitals,  and  the 
like  bear  witness  everywhere  to  the  benevolence  of 
wealthy  men.  All  this  public  and  private  benevolence 
has  certainly  accomplished  wonderful  results  in  relieving 


190  MONOPOLIES  AND    THE  PEOPLE. 

the  want  and  misfortune  of  men,  and  making  their  lot  a 
bearable  one. 

The  above  beneficences  require  outright  giving  ;  but 
there  are  many  ways  in  which  the  fraternal  spirit  of  men 
works  to  cause  men  to  treat  each  other  in  business 
affairs  more  liberally  than  they  would  if  competition 
were  the  only  governing  motive.  In  very  many  cases  of 
the  employment  of  labor,  the  wages  paid  are  higher  than 
the  rate  which  competition  alone  would  fix.  It  is  true 
that  this  is  largely  due  to  a  selfish  motive.  The  men  are 
more  contented  and  industrious  than  when  their  wages 
are  lower.  There  are  always  plenty  of  applicants  for  any 
vacant  position.  The  men  are  not  prone  to  find  fault 
with  their  pay,  knowing  that  plenty  would  be  glad  to  fill 
their  places.  At  the  same  time,  it  is  certainly  true  that 
in  many  cases  a  principal  motive  for  giving  higher  wages 
is  the  desire  to  be  liberal  and  generous  with  the  workers 
whose  labor  brings  income  and  profits.  Again  it  is  very 
frequently  the  case  that  mills  and  mines  are  kept  in 
operation  in  dull  times,  when  goods  must  be  sold  at  a 
loss,  if  sold  at  all,  simply  to  keep  the  employees  from  the 
destitution  and  suffering  consequent  upon  idleness. 
Cases  of  especial  personal  benevolence  are  still  more 
common.  There  are  tens  of  thousands  of  working 
people  to-day  rendering  service  whom  their  employers 
well  know  to  be  unprofitable  servants,  but  who  are  re- 
tained because  their  youth  or  age  or  incapacity  renders 
them  proper  objects  of  assistance  in  this  way,  a  sort  of 
charity  far  better  than  outright  gift. 

In  business  enterprises,  again,  the  spirit  of  fraternity 
is  widely  diffused.  As  we  have  seen,  it  has  been  one 
principal  cause  of  the  formation  of  trusts  and  combina- 
tions to  limit  and  restrain  competition.  There  are  also  a 


AMELIORATING  INFLUENCES.  191 

growing  number  of  enterprises  which  are  purely  philan- 
thropic, such  as  the  provision  of  cheap  and  healthy 
homes  for  working  men  and  women. 

In  the  conduct  of  business,  too,  public  opinion  does 
not  approve  of  the  man  who  exacts  the  utmost  farthing, 
and  weighs  and  measures  to  the  closest  fraction.  The 
most  grasping  creditor,  who  precipitates  the  ruin  upon 
the  bankrupt,  and  the  landlord  or  money-lender,  who 
exacts  pitilessly  and  turns  a  deaf  ear  to  the  call  of  a 
brother  for  mercy,  are  also  condemned  at  the  bar  of 
public  opinion. 

These  and  many  other  considerations  lead  us  to  some 
knowledge  of  the  inestimable  value  of  the  principle  of 
fraternity  to  correct  the  harsh  and  inequitable  working 
of  the  industrial  organism.  It  remains  only  to  be  said 
that  in  this  sphere  of  action  its  influence  is  but  a  small 
fraction  of  what  it  ought  to  be  and  what  it  promises  to 
become. 

It  is  through  their  conscience,  as  well  as  through  their 
innate  sense  of  justice  and  right,  that  men  are  coming  to 
see  how  the  extortion  by  monopolies  and  the  waste  of 
competition  in  which  they  have  engaged  are  an  injury  to 
the  common  weal  and  an  expression  of  might  rather  than 
of  right.  It  is  in  this  way  that  we  are  beginning  to  discern 
the  faults  and  imperfections  of  our  present  industrial 
system  and  to  recognize  that  progress  toward  better 
things  is  to  be  found  by  recognizing,  not  covering,  these 
faults,  and  doing  all  in  our  power  to  remedy  them.  In 
this  work  the  Christian  Church  should  be  in  the  lead  ; 
and  a  large  proportion  of  its  pastors,  accustomed  to  an 
earnest  and  sympathetic  appreciation  of  social  evils,  are 
among  the  foremost  to  second  the  efforts  of  modern  re- 
formers. Of  the  rank  and  file  of  the  Church,  however. 


192  MONOPOLIES  AND    THE  PEOPLE. 

it  is  to  be  regretfully  said  that  they  are  eminently  con- 
servative ;  and  that,  with  very  many  notable  exceptions, 
they  are  certainly  not  in  the  lead  in  the  efforts  to  equal- 
ize the  injustices  which  have  grown  up  under  the  laws  of 
competition.  It  is  largely  because  the  course  of  Chris- 
tians is  in  this  respect  so  inconsistent  with  their  professed 
belief  in  that  grand  doctrine  of  man's  divine  origin  and 
universal  brotherhood,  that  the  Church  is  losing  the  re- 
spect of  the  laboring  classes.  Nor  will  it  regain  that  re- 
spect until  it  shows  by  unmistakable  evidence  to  the  men 
who  toil  with  their  hands  that  it  is  alive  to  the  questions 
of  the  day, — alive  to  the  injustice  of  society  to-day  ;  and 
that  the  love  of  the  Church's  great  Master  for  their  souls 
is  echoed  by  a  longing  in  the  hearts  of  his  followers  for 
their  temporal  welfare. 

But  it  should  be  also  said  that,  save  as  they  assume  it, 
the  responsibility  of  those  within  the  Church  is  not 
greater  than  of  those  without.  All  men  alike  are  brothers  ; 
and  it  is  more,  far  more,  than  a  selfish  tie  that  binds  us 
together  in  civilized  society.  Legal  rights  are  based 
largely  on  the  system  of  competition  under  which  our 
industries  have  grown  up  ;  but  the  moral  duties  of  all 
men  go  far  beyond  this.  It  is  the  duty  of  all  men  alike 
to  supplement  the  working  of  the  law  of  selfish  competi- 
tion with  the  acts  of  a  fraternal  love  for  the  welfare  of  all 
men.  Too  much  stress  cannot  be  laid  on  this.  There 
can  be  little  doubt  that  if  it  were  not  for  the  charity  and 
beneficence  and  for  the  strong  spirit  of  humanity,  which 
lives  in  a  strange  strength,  even  in  the  hearts  of  the  de- 
based and  evil-minded,  the  industrial  warfare  which  our 
modern  competition  has  come  to  be  would  have  wrought 
tenfold  more  evil  than  it  has,  and  would  have  already  ar- 
rayed class  against  class  with  other  weapons  than  those 
of  peaceable  industry.  May  Heaven  grant  that  the  time 


AMELIORATING  INFLUENCES.  193 

shall  never  come  when  the  growth  of  the  principle  of 
human  fraternity  shall  not  far  outstrip  and  overtop  the 
growth  of  human  selfishness,  whatever  forms  the  latter 
may  take. 

In  concluding  this  chapter  it  seems  eminently  proper 
to  call  attention  to  one  practical  application  of  this  great 
principle  of  fraternity  which  ought  to  go  a  great  way 
towards  saving  us  from  the  results  of  mistakes  in  our  at- 
tempts to  remedy  the  evils  which  have  grown  up.  The 
fraternal  principle  should  lead  men  to  judge  charitably 
the  men  who  are  engaged  in  monopolies  and  in  wasting 
the  world's  wealth  in  intense  competition.  The  more 
especially  as  these  evils  are  due,  not  to  the  malignity  of  any 
person,  but  to  our  system  of  industry,  which  causes  them  to 
spring  up.  The  investigation  which  we  pursued  in  the 
first  chapters  showed  very  clearly  that  monopolists  are 
simply  striving,  like  all  other  men,  to  protect  and  ad- 
vance their  own  interests  by  what  they  consider  legal  and 
honorable  means.  And  our  study  of  the  laws  of  com- 
petition has  shown  us  that  the  evils  of  monopoly  and  un- 
healthy competition  are  the  natural  outgrowth  of  the  great 
revolution  in  modern  industries  by  which  the  number  of 
competing  units  has  been  reduced  from  many  to  few. 

Unfortunately  there  is  a  great  tendency  to  make  these 
evils  worse  by  recrimination.  It  is  very  common  to  hear 
those  engaged  in  monopolistic  enterprises,  whether  as 
owners  or  managers,  denounced  as  unscrupulous  vil- 
lains, double-dyed  rascals,  scoundrelly  enemies  of  the 
people,  or  perhaps  in  terms  less  blunt  but  more  scathing. 
Now,  what  are  the  facts  of  the  case  ?  Speaking  broadly, 
it  is  a  fact  that  the  men  who  own  and  manage  our  mod- 
ern monopolies  are  as  a  class  far  more  large-hearted  in 
their  sympathies  than  the  average  of  men.  It  is  only  be- 
muse they  do  not  realize  the  consequences  of  their  acts 


IQ4  MONOPOLIES  AND    THE  PEOPLE. 

that  they  seem  to  those  who  do  realize  them  and  those 
who  suffer  by  them  to  be  incomprehensibly  brutal.  The 
same  man  who  at  a  corporation  meeting  may  do  his  part 
toward  throwing  a  thousand  men  out  of  employment  or 
wasting  a  million  dollars  of  the  world's  wealth  to  effect 
some  monster  "  deal,"  may  stop  as  he  leaves  his  office  to 
help  a  crippled  beggar  regain  his  feet ;  and  when  he  hears 
of  the  destitution  that  his  own  official  act  has  helped 
create,  he  will  give  with  a  lavish  hand  to  relieve  it.  When 
we  come  to  questions  between  labor  and  its  employers, 
more  than  this  is  true.  The  employers  of  labor  as  a 
class  are  closely  in  sympathy  with  the  honest  desire  of 
their  men  to  better  themselves,  and  the  constant  increase 
in  the  employment  of  arbitration  to  settle  difficulties,  the 
experiments  in  co-operation  and  profit-sharing,  and  the 
furnishing  of  cheap  and  good  houses  to  the  workers  are 
all  evidences  of  this  fact. 

The  truth  is,  that  it  is  circumstances,  not  men,  which 
have  created  monopolies.  For  to  tell  the  truth,  there 
are  but  very  few  men  who,  if  put  in  the  place  of  the 
stigmatized  monopolists,  would  not  have  done  as  much 
or  more,  as  their  abilities  permitted,  to  achieve  a  fortune 
as  have  these  men.  All  men  strive  in  general  to  make 
as  much  as  possible  out  of  their  fellow-men,  and  to  gain 
the  most  possible  with  the  least  labor.  The  monopolist  only 
goes  further  on  this  road  than  most  other  men  can  go. 

On  the  other  hand,  a  still  more  common  error  exists 
with  reference  to  the  monopolies  of  labor.  The  news- 
paper press  seems  strangely  fond  of  repeating  the  state- 
ment that  all  labor  organizations  are  kept  up  by  idle  and 
turbulent  labor  agitators,  who  wish  to  live  off  the  pro- 
ceeds of  their  fellows'  labor.  A  little  candid  thought 
and  investigation  will  convince  any  one  that  this  is  an  out- 
and-out  lie,  and  as  such  deserves  the  condemnation  of  all 


AMELIORATING  INFLUENCES.  195 

honest  men.  Granted,  indeed,  that  labor  monopolies  are 
an  evil,  as  we  have  fully  shown,  and  that  the  men  who 
have  charge  of  them  arc  far  from  perfect,  and  make 
many  mistakes,  they  have  far  more  to  excuse  them 
than  have  the  men  who  form  monopolies  for  the  purpose 
of  adding  to  fortunes  already  plethoric.  The  truth  is, 
that  if  the  men  who  are  so  incomprehensibly  unjust  in 
their  estimate  of  the  work  of  labor  organizations  were 
put  in  the  place  of  the  laborers  at  the  bench  or  in  the 
mill,  they  would  be  foremost  in  securing  their  own  rights 
by  organizing  their  fellow  workmen.  It  would  be  a  great 
thing  for  the  world's  peace  if  men  would  try  to  look  at 
their  brother's  failings  through  their  brother's  eyes. 
Before  you  criticise  a  man  too  harshly,  candidly  consider 
whether  you  would  do  any  better  if  you  were  in  his 
place. 

We  hear  much  said  of  the  folly  and  wickedness  of 
stirring  up  and  reviving  the  sectional  animosity  between 
the  North  and  the  South  ;  and  all  patriotic  men  rejoice 
in  burying  past  issues  and  inaugurating  the  era  of  a  united 
nationalism.  But  those  who,  by  personal  attacks  upon 
monopolists,  whether  they  are  millionaire  monopolists  or 
hard-handed  workingmen,  cultivate  animosity  and  hatred 
between  social  classes  already  too  widely  separated  and 
too  prone  to  hostility,  are  sowing  seed  whose  fruit  may 
be  reaped  in  a  social  strife  far  more  destructive  and  fatal 
than  any  sectional  strife  could  be.  In  discussing  reme- 
dies for  the  evils  we  have  been  investigating,  we  should 
always  keep  the  fact  in  mind  that  our  remedy  should 
seek,  not  to  punish,  but  to  cure.  Personal  or  class 
enmities  never  yet  helped  the  world  to  advance.  It  will 
be  fortunate  if  men  can  be  taught  to  see  how  useless 
such  enmities  are  in  this  case  ;  and  how  little  revenge 
and  reprisal  can  ever  do  to  heal  a  wrong. 


XIV. 

REMEDIES  FOR  THE  EVILS  OF  MONOPOLY. 

WE  have  now  investigated  the  nature  of  all  the  differ- 
ent classes  of  monopolies  and  combinations  for  the  sup- 
pression of  competition.  We  have  studied  their  working 
and  their  effect  upon  the  different  classes  of  society.  We 
have  discussed  the  foundation  principles  of  civilized 
society  as  seen  in  abstract  theory  and  as  seen  in  the 
actual  practice  of  to-day,  with  the  evils  which  intense 
•competition  on  the  one  hand  and  extortionate  monopoly 
on  the  other  have  brought  upon  us.  Finally,  we  have 
considered  the  influences  which  tend  to  lessen  and 
ameliorate  these  evils,  and  the  extent  to  which  we  may 
rely  on  them  to  benefit  the  condition  of  society.  We  are 
now  fully  prepared  to  consider  the  remedies  which  are 
proposed  for  these  evils,  and  to  see  in  what  direction 
our  hope  lies  for  the  improvement  of  the  condition  of 
mankind. 

It  would  be  a  far  larger  task  than  we  propose  to  at- 
tempt, however,  to  discuss  all  the  schemes  which  have 
been  proposed  for  bettering  the  condition  of  society. 
They  have  been  numerous  ever  since  the  dawn  of  the 
idea  of  popular  liberty,  have  accompanied  it  all  through 
its  centuries  of  growth,  and  to-day,  despite  the  fact  that 
the  amount  of  the  comforts  of  life  accessible  to  the 

196 


KEMEDIES  FOR  THE   EVILS  OF  MONOPOLY.    197 

masses  of  the  people  is  far  greater  than  ever  before,  plans 
for  further  betterment  of  the  condition  of  society,  the 
more  economical  production  and  equitable  distribution 
of  wealth,  are  being  pressed  forward  and  advocated  more 
strongly  than  ever.  Nor  does  this  fact  furnish  any 
ground  for  pessimism.  We  shall  have  far  more  occasion 
to  deplore  when  men  become  so  conceited  over  the  ad- 
vancement which  the  race  has  already  made, — so  numb 
to  the  evils  which  still  oppress  them, — that  they  will  no 
longer  take  part  in  the  agitation  of  plans  for  further 
advancement. 

In  considering  now  the  plans  proposed  at  the  present 
day  by  those  who  wish  to  remedy  the  evils  of  monopoly, 
we  shall  find  it  profitable  to  consider  first  two  great  op- 
posing principles,  which  we  will  designate  as  individtial- 
ism  and  societism.  Upon  one  or  the  other  of  these  prin- 
ciples almost  every  scheme  for  bettering  the  condition  of 
society  is  based. 

The  doctrine  of  individualism  has  for  its  foundation 
the  absolute  industrial  liberty  of  each  individual.  By 
this  is  meant  that  every  person  shall  have  "  the  free  right 
of  contract," — that  is,  the  right  to  sell  his  labor  or 
property  or  purchase  that  of  others  as  he  chooses.  It 
holds  that  in  all  matters  where  the  production  and  dis- 
tribution of  wealth  is  concerned,  the  desire  of  each  man 
to  advance  his  own  interests  will,  alone,  in  the  long  run, 
result  in  the  highest  good  to  the  greatest  number.  It 
asks  the  government  to  "  let  alone  "  the  industrial  affairs 
of  the  country,  and  leave  private  enterprise  to  take  its 
own  course.  Its  adherents  are  fond  of  asserting  that 
each  man  knows  his  own  wants  and  can  direct  his  own 
business  affairs  much  better  than  any  government  can 
direct  them  for  him.  It  declares  that  free  competition  is 


198  MONOPOLIES  AND    THE  PEOPLE. 

the  best  possible  agent  to  regulate  all  industrial  affairs, 
and  it  ascribes  all  economic  evils  to  the  fact  that  free 
competition  has  been  thwarted  or  destroyed. 

The  opposing  doctrine  of  societism  holds  that  the 
waste  in  the  production  of  wealth  and  the  inequities  in 
its  distribution,  which  afflict  mankind  to-day,  are  due  to 
the  extreme  application  of  the  doctrine  of  individualism. 
Its  adherents  analyze  competition  and  declare  it  to  be 
but  another  expression  of  a  law  of  savage  nature,  tersely 
expressed  as  "the  survival  of  the  fittest."  A  system 
which  brutally  forces  the  weaker  to  the  wall,  say  they,  is 
unfit  to  govern  the  inter-relations  of  civilized  human 
beings.  Condemning  thus  the  principles  and  practice  of 
their  opponents,  they  would  go  to  the  opposite  extreme 
and  place  the  control  of  the  production  and  distribution 
of  wealth  in  the  hands  of  organized  society  or  of  local 
and  central  governments,  to  be  by  them  administered  for 
the  common  benefit. 

The  first  and  most  obvious  commentary  upon  these 
two  opposing  doctrines  is  that  either  of  them  is  im- 
practicable ;  and  that  if  either  of  them  were  given  the 
entire  control  of  our  industries,  the  whole  people  would 
unite  in  condemning  it.  Lest  there  should  be  any  mis- 
take as  to  what  is  meant  by  this,  it  is  well  to  say  that  we 
now  refer  to  neither  the  individualism  nor  the  societism 
which  is  practically  advocated  at  the  present  day,  but 
rather  to  the  essence  of  the  two  opposing  principles. 

To  see  most  clearly  the  practical  failure  of  either  of 
these  principles  when  applied  without  modification  by 
the  other,  consider  our  present  social  system,  which 
is  based  on  both  individualism  and  societism.  If  the 
principle  of  individualism  were  to  be  fully  applied  and 
societism  were  to  be  entirely  abolished,  a  first  step  would 


REMEDIES  FOR  THE   EVILS  OF  MONOPOLY.    199 

be  the  relinquishment  by  the  government  of  all  the  en- 
terprises it  now  carries  on  ;  and  they  would  be  left  for 
private  enterprise  to  take  up  or  leave  alone  as  it  chose. 
This  means,  for  one  thing,  to  bring  the  matter  plainly 
home,  that  the  whole  national  postal  system  would  be 
wiped  out,  and  we  should  depend  on  some  private  com- 
pany or  companies  to  collect,  carry,  and  distribute  our 
mails.  The  government  would  also  abandon  all  its  work 
in  keeping  clear  and  safe  the  natural  waterways  of  the 
country,  as  well  as  all  the  harbors,  light-houses,  etc. 
Municipal  governments  would  give  up  all  their  systems 
of  water  supply  to  private  companies,  as  well  as  their 
sewerage  systems,  and  even  paving,  street  cleaning,  etc. 
Indeed,  the  maintenance  of  our  whole  system  of  high- 
ways would  be  given  over  to  private  enterprise.  Is  this 
too  much  ?  It  is  only  a  legitimate  application  of  the 
principle  that  government  should  leave  to  private  enter- 
prise all  matters  connected  with  commerce  and  industry. 
Little  need  be  said  to  prove  that  a  similar  application  of 
the  principle  of  societism  to  our  industrial  system  would 
result  even  more  disastrously.  As  a  general  thing,  the 
necessary  formality  and  expense  of  administration  when 
business  is  carried  on  by  the  government,  causes  the  final 
cost  of  production  to  be  much  greater  than  under  private 
management,  even  when  conducted  with  all  honesty.  But 
the  chief  reason  why  the  principle  of  societism  is  imprac- 
ticable and  unwise  for  universal  application,  lies  in  the 
fact  that  the  men  who  administer  our  governments  are 
neither  the  wisest  nor  the  most  honest  of  men.  The 
competition  among  those  engaged  in  private  business 
tends  by  a  process  of  natural  selection  to  bring  the  men 
of  greatest  business  ability  into  control  of  affairs.  But  by 
any  form  of  government  yet  tried,  popularity  rather  than 


200  MONOPOLIES  AND    THE  PEOPLE. 

merit,  and  excellence  in  the  arts  of  the  politician,  rather 
than  experience  and  capacity  as  a  statesman  and  business 
man,  are  the  qualities  which  place  men  in  positions  where 
they  can  control  public  affairs.  Not  that  very  many  wise 
and  good  men  do  not  now  hold  office,  and  that  many  un- 
principled and  vicious  men  do  achieve  success  in  private 
business.  But,  as  a  general  rule,  the  statements  just  made 
hold  good. 

It  seems  plainly  apparent,  then,  that  neither  the  prin- 
ciple of  individualism  nor  the  principle  of  societism  can 
be  taken  as  an  infallible  guide  for  determining  the  con- 
trol of  our  industry.  It  would  be  as  manifestly  unwise  to 
take  a  step  toward  abolishing  existing  societism  by  pla- 
cing our  postal  department  under  the  control  of  a  private 
company,  as  it  would  be  to  make  a  move  toward  abolish- 
ing individualism  by  having  the  government  assume  the 
management  of  all  the  farms  in  the  country.  Both  of 
these  principles  are  necessary. 

There  is,  indeed,  a  marked  tendency  toward  an  in- 
creased reliance  on  the  principle  of  societism  as  civiliza- 
tion progresses  and  our  life  becomes  necessarily  more 
intense  and  complex.  A  community  of  plain  farmers, 
isolated  from  each  other,  can  live  their  individual  lives 
about  as  they  please,  without  any  interference  of  the  gov- 
ernment becoming  necessary  to  protect  the  rights  of  each 
man  from  infringement  by  his  neighbors.  But  the  resi- 
dent in  a  large  village  must  submit  to  certain  restrictions 
for  the  common  good.  He  must  not  carry  on  any  kind 
of  business  likely  to  become  a  public  nuisance.  His 
cattle  may  not  graze  in  the  streets.  He  must  give  part 
of  his  earnings  toward  maintaining  a  water  supply  for  a 
protection  against  fire.  The  citizen  of  a  great  city  is 
subject  to  far  more  restrictions.  The  government  as- 


REMEDIES  FOR  THE  EVILS  OF  MONOPOLY.    2OI 

sumes  the  control  of  education,  charities,  the  care  of  the 
public  health,  the  drainage  of  the  streets,  the  collection 
of  offal,  and  a  multitude  of  other  duties  which  in  a  less 
intense  civilization  each  family  performs  for  itself. 

The  advance  in  science  and  the  arts,  too,  has  brought 
about  a  revolution  whose  effect  we  must  recognize.  A 
hundred  years  ago  almost  qvery  community,  and  to  a 
large  degree  every  family,  was  industrially  almost  inde- 
pendent of  every  other,  as  we  have  already  shown.  To- 
day each  man  relies  on  a  million  others  to  supply  him 
with  the  commonest  necessaries  of  life.  The  armored 
knight  was  proof  against  all  foes,  save  the  few  antago- 
nists similarly  clad.  To-day  my  life  is  dependent  on  the 
fidelity  and  vigilance  of  ten  thousand  men,  and  every 
man  I  meet  has  me  in  his  power.  Given  the  malignant 
will  and  fiendish  cunning  necessary,  and  one  single  man 
can  kill  a  thousand  human  beings  and  destroy  a  million 
dollars  at  a  blow.  To  sum  up,  each  advance  in  civiliza- 
tion makes  men  more  dependent  upon  each  other,  and 
increases  the  advantage  and  necessity  of  having  indus- 
tries most  important  to  the  common  welfare  controlled  by 
society  as  a  whole  instead  of  by  individuals. 

It  is  contended  by  some  that  from  the  increased  inter- 
ference of  government  with  private  affairs,  there  is  danger 
that  the  liberties  of  the  people  will  be  curtailed,  and  that 
their  rights  will  be  so  hedged  about  by  restrictions  that 
the  result  will  be  evil  instead  of  beneficial.  To  this  it 
must  be  answered  that  the  people  themselves  are  the 
source  of  the  government's  authority  and  power  of  re- 
striction, and  that  in  no  case  will  a  restriction  of  the 
government  be  long  maintained  which  does  not  benefit 
far  more  in  conserving  the  rights  of  men  than  it  injures 
by  infringing  them.  Apply  this  rule  to  any  case  of  gov- 


202  MONOPOLIES  AND    THE  PEOPLE. 

eminent  action  in  industrial  matters.  A  city  government, 
for  instance,  constructs  a  system  of  sewerage.  All  tax- 
payers must  contribute  something  towards  its  expense, 
and  their  right  to  spend  that  money  in  such  other  ways 
as  they  choose  is  abridged  ;  but,  at  the  same  time,  the 
more  important  right  of  having  healthy  and  safe  drainage 
for  their  houses  is  conserved.  In  a  similar  way,  the  gov- 
ernment may  pass  laws  of  various  sorts  to  restrict  and 
control  what  seems  to  be  at  first  sight  purely  private 
business,  such  as  the  sale  of  explosives,  spirituous  liquors, 
poisons,  drugs,  and  many  other  articles.  In  every  in- 
stance, this  is  done  on  the  ground  that  the  interference 
of  government  is  necessary  to  protect  the  rights  of  the 
community  as  a  whole,  even  though  the  liberties  of  certain 
classes  are  abridged. 

The  study  of  these  facts  brings  to  our  attention  an 
important  principle  of  governmental  action,  which  should 
always  be  remembered  when  in  any  industrial  matter  we 
find  that  the  principle  of  individual  action  is  producing 
unsatisfactory  results,  and  conclude,  therefore,  to  ask  the 
government  to  take  some  part  in  its  control.  This  prin- 
ciple is  as  follows  :  government,  as  the  representative  of  the 
•will  of  the  whole  people,  should  in  general,  attempt  the  regu- 
lation, or  control,  of  industrial  matters  only  to  benefit  the 
people  as  a  whole. 

Of  course  it  cannot  be  said  that  all  government  action 
for  the  benefit  of  special  classes  of  the  community  is 
wrong.  The  granting  of  pensions  to  those  defenders  and 
upholders  of  the  government  who  deserve  it,  is  a  case  in 
point  where  special  legislation  is  justifiable  and  proper  ; 
and  many  other  cases  exist.  Nevertheless,  the  shaping 
of  legislation  to  effect  the  interests  of  special  classes  of 
the  community  is  one  which  is  now  working  the  nation 


REMEDIES  FOR  THE  EVILS  OF  MONOPOLY.   203 

serious  injury  ;  and  it  has  obtained  so  firm  a  hold  that  it 
will  take  a  long  time  for  us  to  throw  it  off.  It  causes 
men  of  all  classes  to  consider  the  government  as  a  pater- 
nal benefactor,  whose  duty  it  is  to  aid  them,  either  in 
their  schemes  for  getting  rich  or  their  struggles  to  earn  a 
living  ;  when  its  real  office  is  to  protect  all  citizens  in 
their  individual  rights,  undertake  only  such  industrial 
enterprises  as  can  manifestly  be  better  and  more  economi- 
cally conducted  by  it  than  by  private  enterprise,  and  en- 
force restrictions  upon  industry  only  as  they  are  needed 
to  protect  personal  rights  or  the  interests  of  the  com- 
munity as  a  whole.  Worst  of  all,  the  use  of  government 
to  advance  special  interests  places  a  premium  on  the 
efforts  of  those  who  seek  to  corrupt  the  expression  of  the 
popular  will  in  its  every  stage,  from  the  voters  at  the  polls 
to  the  chief  rulers  in  the  seats  of  government.  For  by 
combining  to  accomplish  their  mutual  purposes,  they  are 
able  to  turn  aside  all  departments  of  government  from 
their  legitimate  work  and  occupy  them  with  measures  to 
advance  special  interests,  some  commendable  enough, 
others  a  mere  excuse  for  stealing  from  the  public  treas- 
ury, but  all  alike  claiming  attention  and  action,  while  the 
business  of  the  people  goes  all  awry. 

It  has  seemed  necessary  to  thus  briefly  discuss  these 
two  opposing  theories  of  society,  individualism  and  so- 
cietism,  in  order  to  show  the  impracticability  of  either 
when  applied  to  the  society  of  to-day  without  limitation 
and  modification  by  the  other  ;  and  that  in  adopting  or 
rejecting  any  remedies  that  may  be  proposed  for  the  in- 
dustrial evils  which  we  have  discussed,  we  should  be 
guided  by  the  facts  as  we  find  them,  and  not  by  blind 
adherence  to  abstract  principles. 

Let  us  now  gather  up  the  salient  decisions  which  we 


204  MONOPOLIES  AND    THE  PEOPLE. 

have  reached  in  all  our  past  investigation.  We  have  dis- 
covered that  a  great  industrial  revolution  is  in  progress, 
by  which  manufacturing,  mining,  and  transportation  to  a 
very  great  extent,  and  other  industries  to  a  considerable 
extent,  have  been  and  are  being  concentrated  in  the  hands 
of  a  very  few  competitors.  We  have  found  that  by  the 
laws  of  competition  this  reduction  in  the  number  of  com- 
petitors greatly  increases  the  intensity  of  competition 
and  the  resulting  waste  and  instability  of  price,  and 
finally  brings  monopoly  into  existence.  This  monopoly 
we  have  determined  to  be  a  serious  infringement  on  the 
rights  of  the  people,  and  we  have  found  that  the  losses 
due  to  intense  competition  and  the  fruitless  attempts  to 
defeat  monopoly  by  adding  new  competing  units  have 
wasted  the  wealth  of  the  nation  in  uncounted  millions. 
We  are  now  to  consider  the  remedies  proposed  for  these 
evils. 

The  most  obvious  remedy  for  monopoly,  and  the  one 
which  has  been  tried  and  persevered  in  with  the  most  re- 
markable faith,  is  the  creation  of  new  competitors.  Does  a 
railroad  monopoly  oppress  us  ?  Build  a  competing  line. 
Is  the  gas  company  of  our  city  charging  us  $3  per  thou- 
sand for  gas  which  cost  but  50  cents  to  produce  and 
deliver  ?  Let  us  start  another  gas  company  and  tear  up 
all  our  pavements  again  to  lay  its  mains.  Has  the  sugar 
trust  put  up  the  price  of  sugar  two  cents  per  pound  ? 
Well,  "  sugar  can  be  produced  anywhere  by  the  expendi- 
ture of  labor  and  capital,"  the  Trust's  lawyers  say,  and  so 
we  will  "  trust  "  that  some  enterprising  manufacturer  will 
take  the  field  against  the  combination.  But  if  we  do  any 
of  these  things,  we  have  added  only  one  competitor  to  the 
number  in  the  field.  And  with  only  two  competitors  in 
the  field,  competition  is  sure  to  be  so  intense  and  wasteful 


REMEDIES  FOR  THE  EVILS  OF  MONOPOLY.   2O$ 

that  the  formation  of  a  new  monopoly  is  a  matter  of  but 
a  short  time. 

This  is  the  conclusion  to  which  the  theory  brings  us  ; 
and  the  more  one  studies  the  history  of  actual  attempts 
to  create  competition  in  this  way,  the  more  thoroughly 
convinced  he  must  be  that  the  inevitable  result  will  be 
the  same, — the  tacit  or  formal  combination  between  the 
old  monopoly  and  the  new  competitor,  resulting  in  the  re- 
establishment  of  the  absolute  reign  of  monopoly.  The 
author  has  thoroughly  studied  the  actual  working  of 
hundreds  of  schemes,  in  every  part  of  the  United  States, 
whose  object  was  to  create  competition  in  railroad  trans- 
portation. It  is  a  most  astonishing  fact  to  see  the  eager- 
ness with  which  thousands  of  municipalities,  all  over  the 
country,  which  have  taken  great  loads  of  debt  upon  their 
shoulders  to  secure  "competing  lines,"  and  have  seen 
these  lines  swallowed  up  by  their  rivals,  are  still  anxious 
to  repeat  the  folly  and  assume  new  burdens  to  aid  in 
building  new  lines,  which  will  inevitably  be  absorbed 
like  those  which  they  preceded.  If  the  people  as  a 
whole  learn  wisdom  by  experience,  they  seem  to  learn 
with  painful  slowness.  The  first  great  lesson  for  the 
people  who  are  groaning  under  the  burden  of  monopoly 
to  learn,  then,  is  that  when  we  try  to  defeat  monopoly  by 
creating  new  competing  units,  the  remedy  is  worse  for 
the  community  at  large  than  the  disease,  and  effects  at 
best  but  a  temporary  relief. 

Another  class  of  remedies  against  monopoly  seek  to 
accomplish  their  purpose  by  opposing  the  tendency  to  a 
reduction  in  the  number  of  competing  units.  There  are 
not  wanting  people  who,  having  gained  a  dim  perception 
that  monopolies  are  an  inevitable  result  of  the  modern 
concentration  of  industry,  conclude  that,  after  all,  "  the 


206  MONOPOLIES  AND    THE  PEOPLE. 

former  days  were  better  than  these,"  and  that  our  wisest 
course  is  a  retrograde  one.  Fortunately,  however,  these 
people  are  comparatively  few.  It  is  a  fact  so  plain  that 
even  the  dullest  can  hardly  fail  to  perceive  it,  that  the 
consolidation  and  concentration  of  industry  which  have 
gone  on  everywhere  have  wonderfully  cheapened  the 
cost  of  production, — made  it  possible  for  us  to  make 
better  goods  with  a  less  expenditure  of  labor  and  ma- 
terial. The  revolution  in  our  industries  could  not  be 
undone  without  a  more  radical  action  toward  vested 
property  rights  than  could  be  countenanced  now  ;  and 
as  already  seen,  it  would  work  to  the  detriment  of  every 
person  in  the  community.  We  cannot  go  back  to  the 
stage-coach,  the  workshop,  and  the  hand-loom  of  our 
ancestors  ;  we  cannot,  if  we  would,  undo  the  growth  of  a 
century  in  civilization  ;  and  it  is  well  that  it  is  so. 

But  while  most  men  see  the  benefit  which  has  resulted 
from  the  consolidations  already  effected,  there  are  but 
few  who  are  not  opposed  to  further  consolidations.  It 
is  argued  that  the  reduction  in  the  number  of  competing 
units  results  in  increasing  the  intensity  of  competition, 
which  is  assumed  to  be  a  desirable  end  ;  and  that  it  has 
also  worked  great  benefit  in  the  reduction  in  cost. 
Having  attained  this,  it  is  proposed  to  stop  further  con- 
solidations and  prevent  the  establishment  of  monopoly. 
This  is  what  most  of  the  present  plans  for  giving  relief 
from  monopoly  propose  to  accomplish.  Certainly  the 
task  is  no  easy  one  ;  let  us  inquire  if  it  be  even  possible. 

We  may  safely  assume,  in  the  first  place,  that  the  com- 
petitors in  any  industry  will  always  be  reduced  to  a  very 
small  number  before  the  public  will  be  sufficiently 
aroused  to  make  any  movement  for  the  prevention  of 
consolidation.  So  long  as  a  monopoly  is  not  imminent, 


REMEDIES  FOR  THE   EVILS  OF  MONOPOLY.   2O/ 

usually,  indeed,  so  long  as  it  is  not  in  actual  operation,  no 
one  cares  or  notices  how  far  consolidation  and  combi- 
nation goes.  Now  by  the  laws  of  competition,  when  the 
number  of  competing  units  is  small,  competition  is  intense 
and  wasteful,  and  acts  to  so  reduce  the  returns  from  in- 
dustry that  combination  and  the  establishment  of  a 
monopoly  are  a  natural  sequence. 

Evidently  this  result  can  only  be  prevented  by  some 
interference  outside  the  industry  itself.  If  we  allow  it  to 
take  its  own  course,  a  monopoly  is  certain,  sooner  or 
later,  to  be  formed.  But  the  only  agency  which  has  the 
right  and  power  to  interfere  is  government.  The  ques- 
tion then  is,  can  government  successfully  interfere  to 
prevent  intense  competition  from  bringing  about  monop- 
oly ?  In  order  to  do  this  it  must  of  course  keep  com- 
petition in  action  ;  but  it  cannot  do  this  directly.  Com- 
petition is  essentially  a  strife.  No  law  was  ever  enacted 
which  could  force  two  men  to  fight  if  they  were  really 
determined  to  be  at  peace.  No  law  was  ever  enacted 
which  could  force  two  manufacturers  or  merchants  to 
compete  with  each  other  in  price,  if  they  really  were 
agreed  to  sell  at  the  same  price.  The  common-law 
principle  that  contracts  in  restraint  of  competition  are 
void,  so  often  appealed  to  nowadays,  has  really  but  slight 
power.  It  merely  prevents  the  parties  who  make  an 
agreement  to  restrain  competition,  from  enforcing  such 
agreements  in  court.  Attempts  have  also  been  made  to 
apply  this  principle  to  secure  an  annulment  of  the  charter 
of  corporations  which  engage  in  monopolistic  combina- 
tions. Even  if  this  be  successful,  the  only  result  probable 
is  that  private  parties  instead  of  corporations  will  carry 
on  the  monopolies  in  a  few  cases,  while  in  most  cases 
the  competition-destroying  agreements  will  be  made  so 


2O8  MONOPOLIES  AND    THE  PEOPLE. 

secretly  that  it  will  be  impossible  to  prove  their  ex- 
istence. 

It  is  thus  plain  that  the  action  of  the  government  in 
declaring  the  restriction  of  competition  to  be  illegal  is 
wholly  ineffectual  to  check  the  growth  of  monopoly. 
And,  further,  the  fact  is  that  it  is  hardly  possible  for  the 
government  to  take  any  more  extreme  stand  in  the 
matter.  Let  us  suppose  that  it  does  declare,  not  only 
that  these  combinations  are  against  public  policy,  but  that 
they  shall  be  punished.  Then  would  it  be  a  punishable 
offence  for  two  country  grocers  who  had  been  selling 
sugar  below  cost  to  agree  that  henceforth  they  would 
charge  a  uniform  price  and  make  an  eighth  of  a  cent  per 
pound  !  It  is  to  be  remembered  that  competition  necessi- 
tates action.  Can  the  government,  therefore,  compel  a 
man  to  compete,  to  cut  prices  below  his  neighbors,  or  to 
carry  on  his  business  at  all,  if  he  does  not  choose  to  do 
so  ?  Such  a  law  would  establish  the  government's  right 
to  regulate  the  conduct  of  purely  private  business  to  a 
degree  never  before  known.  Such  a  law  to  protect  the 
theory  of  individualism  would  be  a  most  flagrant  in- 
fringement of  the  rights  of  individuals.  It  is  plain,  then, 
that  government  cannot  possibly  keep  up  competition 
by  direct  action. 

Whether  it  is  possible  to  do  so  by  indirect  means  is  a 
much  harder  question.  Monopoly  results,  as  we  have 
found,  from  the  intensity  of  competition.  If  it  is  pos- 
sible to  modify  the  intensity, to  keep  the  candle  from  burn- 
ing itself  out  too  quickly,  so  to  speak,  it  is  possible  that 
competition  may  be  kept  alive  by  legislative  enactment. 
So  far,  practically  nothing  has  been  done  in  this  di- 
rection, and  it  remains  yet  to  be  seen  what  remedies 
of  this  sort  may  accomplish. 


REMEDIES  FOR  THE  EVILS  OF  MONOPOLY.   2OQ 

A  pertinent  example  of  an  attempt  by  the  govern- 
ment to  keep  competition  alive  is  the  Interstate  Com- 
merce law.  Before  its  passage  the  railway  companies 
had  a  patched-up  and  nominally  illegal  species  of  com- 
bination to  restrict  competition,  known  as  pooling.  As 
described  by  President  Charles  Francis  Adams  of  the 
Union  Pacific  Railway,  "  it  was  merely  a  method  through 
which  the  weaker  corporations  were  kept  alive."  The 
Interstate  law  prohibited  this  restriction  of  competition, 
and  also,  by  enactment  of  the  long-  and  short-haul 
clause,  made  the  competition  more  widespread  and  in- 
jurious to  the  railways.  As  a  result  an  astonishing  im- 
petus has  been  given  to  the  growth  of  the  great  systems 
and  the  consolidation  of  the  minor  competing  roads. 
More  than  that,  however,  the  great  increase  in  the  in- 
tensity of  competition  has  done  so  much  to  drain  the 
resources  of  the  companies  and  injure  their  revenues, 
that  some  measure  for  uniting  all  the  railroads  of  the 
country  under  one  management  is  now  being  seriously 
planned  by  many  men  in  railroad  circles.  Thus  this 
result,  which  was  probably  inevitable,  has  doubtless 
been  hastened  many  years  by  the  action  of  the  law. 
The  means  taken  to  intensify  competition  has  opera- 
ted, as  might  have  been  expected,  to  hasten  the  com- 
plete establishment  of  monopoly. 

We  have  now  found  that  monopoly  is  the  inevitable 
result  of  the  concentration  of  competition  in  any  in- 
dustry in  a  few  hands,  if  events  are  allowed  to  take  their 
natural  course  ;  that  the  only  agent  which  has  either  the 
right  or  the  power  to  interfere  in  the  case  is  the  govern- 
ment,— National,  State,  or  Municipal  ;  that  government 
cannot  punish  directly  those  who  form  combinations  to 
restrict  competition,  without  exercising  to  an  unprece- 


210  MONOPOLIES  AND    THE  PEOPLE. 

dented  degree  its  right  to  interference  with  private  af- 
fairs ;  while  its  attempt  to  deter  men  from  establishing 
monopolies  by  refusing  its  protection  to  them  in  their 
contracts  to  restrict  competition  has  proved  to  be  but  a 
slight  hindrance  to  the  growth  of  monopoly. 

There  are,  then,  but  two  ways  of  preventing  monop- 
oly from  establishing  itself  and  laying  such  a  tax  upon 
the  people  at  large  for  the  supply  of  the  commodity 
which  it  controls  as  it  chooses.  The  first  is,  action  to 
reduce  the  intensity  of  competition  so  that  the  weaker 
competitors  may  maintain  their  independence  and  not 
be  forced  to  consolidate  with  their  stronger  rivals.  The 
second  is,  action  to  permit  or  encourage  the  establish- 
ment of  monopoly,  and  regulate  by  some  means  other 
than  competition  the  prices  which  it  shall  charge  for  the 
products  and  the  quality  of  product  which  it  shall  sup- 
ply. These  two  general  classes  of  remedies  which  we 
find  to  be  feasible  we  will  discuss  here  only  in  a  general 
way.  The  first,  reduction  in  the  intensity  of  competi- 
tion, has  hardly  been  tried  in  any  form,  and  we  cannot 
yet  say  what  practical  means  should  be  taken  to  put  it 
into  effect.  We  will  return  to  this  at  a  later  period  in 
our  discussion. 

The  second  remedy  is  the  one  towards  whose  adop- 
tion we  are  rapidly  working.  State  and  Interstate  Com- 
missions have  already  been  established  to  regulate  rail- 
way monopolies  ;  and  in  general  it  is  true  that  the  peo- 
ple who  feel  the  burden  of  monopolies  are  looking  to 
the  government  for  relief,  and  expect  it  to  take  positive 
action  for  the  control  of  other  monopolies  as  it  has  for 
the  control  of  railways.  It  will  be  seen  that  we  have 
now  arrived  by  a  study  of  the  various  possible  rem- 
edies for  monopoly  at  the  same  irresistible  conclusion 


REMEDIES  FOR  THE  EVILS   OF  MONOPOLY.    211 

to  which  we  were  brought  by  our  study  of  the  laws  of 
competition.  The  proper  remedy  for  monopoly  is  not  aboli- 
tion but  control.  It  seemed  necessary  to  conduct  this 
independent  investigation  in  order  that  no  blind  adher- 
ence to  individualism  and  no  thought  of  the  possible 
efficacy  of  other  remedies  might  lead  us  to  doubt  this 
important  truth. 

We  have  next  to  consider  the  fact  that  the  government 
can  control  monopolies  in  two  ways.  It  can  either 
permit  the  monopoly  to  remain  under  private  ownership, 
and  regulate  its  operations  by  law  and  by  duly  appointed 
officers  ;  or  it  can  itself  assume  the  entire  ownership  and 
control  of  the  monopoly.  Which  of  these  plans  is  the 
better,  is  a  question  of  public  policy  over  which  future 
political  parties  are  likely  to  dispute.  One  party  will 
hold  that  when  it  is  necessary  for  the  government  to  in- 
terfere to  protect  those  whom  it  represents  from  the 
oppression  of  monopoly,  it  should  assume  at  once  the 
whole  ownership  and  management  of  the  monopoly. 
Their  opponents  will  argue  that  government  should 
interfere  only  to  the  extent  needful  to  maintain  the 
rights  of  the  public  ;  and  that  it  is  far  better  that  indus- 
try should  be  directed  by  the  private  individuals  whose 
interests  are  at  stake  than  by  government  officials.  To 
discuss  fully  the  arguments  for  each  of  these  two  princi- 
ples of  our  future  practice  in  dealing  with  monopolies, 
would  be  beyond  the  intended  scope  of  this  volume.  It  can 
only  be  briefly  said  that  the  arguments  presented  will 
certainly  indicate  that  the  conditions  surrounding  each 
given  monopoly  will  have  great  weight  in  determining 
which  policy  is  the  most  advantageous.  It  would  be 
manifestly  unwise,  for  instance,  to  place  our  postal 
facilities  under  the  direction  of  a  corporation,  even 


212  MONOPOLIES  AND    THE  PEOPLE. 

though  its  operations  were  regulated  by  government.  It 
would  be  even  more  unwise  to  place  the  operations  of 
the  flouring  mills  of  the  country  in  the  hands  of  a  depart- 
ment of  the  government.  The  important  factors  to  be 
considered  in  deciding  any  given  case  are,  first,  the 
importance  and  necessity  to  the  public  of  the  service, 
and,  second,  the  question  whether  production  in  the 
given  case  is  likely  to  be  carried  on  more  economically 
by  the  government  or  by  private  enterprise.  The  former 
has  an  advantage  in  that  it  can  secure  its  capital  at  a 
lower  rate  of  interest.  The  latter,  an  advantage  in  that 
it  secures  greater  efficiency  from  the  labor  it  employs 
Other  circumstances  being  equal,  it  would  appear  wisest, 
then,  for  government  to  take  direct  charge  of  those 
monopolies  in  which  the  greatest  amount  of  capital  is 
invested  and  the  least  labor  is  employed,  leaving  to 
private  enterprise  under  government  regulation  the 
operation  of  monopolies  in  which  the  opposite  set  of 
conditions  prevails. 

As  already  stated,  however,  the  question  is  compli- 
cated by  the  social  and  industrial  effects  which  might 
follow  a  large  transfer  of  enterprise  from  private  to 
governmental  direction  ;  and  these  effects  we  will  not 
now  discuss. 


XV. 


THE   SOVEREIGN    RIGHTS  OF   THE    PEOPLE   AND  OF 
THEIR  REPRESENTATIVE,  THE  GOVERNMENT. 

WE  have  now  at  last  deduced  the  important  facts,  that 
the  only  remedy  for  the  evils  of  monopoly  must  come 
from  the  popular  will,  expressed  in  direct  action  by  the 
government  ;  that  the  government  may  possibly  keep 
competition  alive  by  checking  its  intensity,  or  can  cer- 
tainly allow  events  to  take  their  natural  course  and 
permit  monopolies  to  be  established.  It  can  then  protect 
the  public,  either  by  assuming  itself  the  ownership  and 
operation  of  the  monopoly,  or  by  taking  the  less  radical 
step  of  placing  the  monopoly  under  official  supervision 
and  control  while  permitting  its  private  ownership  to 
continue.  This  conclusion  is  of  the  utmost  importance, 
for  it  marks  out  one  single  direction  as  the  one  in  which 
relief  from  the  evils  which  vex  us  may  be  found.  If  we 
can  once  make  the  thinking  people  of  the  country  under- 
stand the  effect  which  monopolies  have  upon  their 
welfare,  and  that  the  evil  will  not  cure  itself  and  cannot 
be  cured  by  attempts  to  create  competition  or  by  any 
remedy  short  of  direct  action  by  the  government,  we 
shall  have  made  a  great  advance. 

But  with  this  goal  reached,  new  questions  at  once  pre- 
sent themselves.  Can  the  interference  of  the  government 

213 


214  MONOPOLIES  AND    THE  PEOPLE. 

with  private  industries  be  defended  ?  How  shall  govern- 
ment exercise  its  control,  so  as  to  protect  the  people 
without  infringing  vested  property  rights  and  discourag- 
ing private  enterprise  ?  It  may  be  objected,  too,  that, 
while  our  preceding  discussion  has  fully  proved  the 
weakness  of  other  methods  of  dealing  with  monopoly, 
compared  with  that  by  the  direct  action  of  government, 
it  has  not  been  shown  that  the  latter  is  practicable,  or 
that  it  would  not  be  likely  to  result  in  more  harm  than 
good  to  the  people  at  large. 

These  questions  are  coming  before  the  people  in  a 
thousand  practical  forms.  They  are  being  fought  over 
in  courts  and  legislatures  and  councils,  and  are  destined 
to  be  fought  over  at  the  polls.  How  important  their 
right  decision  is,  we  have  already  seen.  Let  us  make 
some  attempt  to  find  what  this  right  decision  is. 

In  taking  up  first  the  question  of  the  rights  of  private 
property  holders,  we  touch  a  point  over  which  there 
is  likely  in  the  future  to  be  serious  dispute.  A  certain 
faction  vigorously  contend  that  past  precedents  are  no 
ground  on  which  to  base  future  action,  and  that  little  at- 
tention need  be  paid  to  the  rights  of  private  owners  if  the 
public  interest  is  at  stake.  A  far  stronger  and  more 
influential  faction  are  jealous  of  every  thing  which  seems 
to  question  their  right  to  hold  and  use  their  property  in 
whatever  way  they  see  fit.  But  certainly,  if  their  claims 
are  just,  they  need  not  fear  the  result  of  that  investiga- 
tion which  every  idea  we  have  inherited  from  former 
generations  has  in  these  days  to  receive.  It  would  be 
beyond  the  scope  of  our  investigation  to  make  any  ex- 
haustive study  of  this  subject,  but  it  is  necessary  to  note 
some  of  the  important  facts  in  connection  with  property 
rights  as  light  upon  the  question  at  issue. 


THE  SOVEREIGN  RIGHTS  OF  THE  PEOPLE.    21$ 

In  the  first  place,  it  must  be  conceded  that  the  ques- 
tion is  to  be  decided  upon  its  merits,  and  not  by  prece- 
dent. It  is  of  little  use  for  one  faction  to  show,  as  they 
can,  that  the  idea  of  private  property  is  largely  of  modern 
growth  ;  or  for  their  opponents  to  prove,  as  they  may, 
that  the  progress  of  law  and  government  has  been  con- 
tinually toward  better  protection  of  the  rights  of  property. 
The  question  must  be,  on  what  grounds  of  inherent  right 
or  public  expediency  is  property  held  to-day  in  private 
ownership  ?  Distasteful  as  it  may  be,  to  realize  that 
what  has  been  considered  a  fundamental  principle  of 
civilized  society  is  here  challenged  and  put  upon  the  de- 
fensive, the  fact  remains  that  the  defence  must  be  made, 
and  must  be  based  only  on  what  is  just  and  wise  to-day, 
for  the  opposing  side  may  properly  reject  arguments 
based  on  the  wholly  different  conditions  under  which 
past  generations  lived. 

The  question  of  the  rights  of  property  in  the  products 
of  labor  we  may  pass  briefly,  as  it  is  almost  undisputed  ; 
and  while  certain  thinkers  have  asserted  that  there  is  no 
such  thing  as  a  natural  right  to  the  ownership  of  property 
of  any  sort,  it  seems  certain  that  this  is  true  only  in 
a  technical  sense  ;  and  that  a  man's  right  to  hold,  control, 
dispose  of,  and  enjoy  the  fruits  of  his  own  strength 
or  skill  is  as  certain  as  his  right  to  "  life,  liberty,  and  the 
pursuit  of  happiness,"  and  follows  from  that  right  as  a 
natural  sequence.  The  most  radical  revolutionist  hardly 
ventures  nowadays  to  argue  against  this  fact.  Thus, 
though  it  is  recognized  that  private  property  even  in 
one's  own  strength  and  skill  must,  at  times,  be  subjected 
to  the  higher  law  of  public  necessity — as  when  in  time  of 
war  a  man  may  be  obliged  to  give  up  his  time,  strength, 
and  even  life  for  the  public  welfare — in  general  the  right 


2l6  MONOPOLIES  AND    THE  PEOPLE. 

to  hold  the  results  of  labor  as  private  property  is  well 
established,  on  the  grounds  both  of  natural  right  and 
public  expediency. 

But  when  we  consider  the  private  ownership  of  the 
gifts  of  Nature  and  of  public  franchises,  it  is  apparent 
that  we  are  on  very  different  ground.  These  forms  of 
property,  which  constitute  a  great  proportion  of  the 
world's  total  wealth,  are  not  created  by  labor.  Nature's 
gifts  were  not  stored  up  to  enrich  and  benefit  any  one 
man,  but  the  whole  race.  It  follows,  therefore,  that  they 
are  always,  in  the  first  instance,  public  property. 

The  argument  presented  to  prove  any  inherent  right  of 
the  private  owners  to  any  form  of  natural  wealth  seem  to 
be  insufficient  to  prove  the  case.  The  fact  seems  to  be 
that  the  inherent  right  to  the  benefit  of  every  one  of  Na- 
ture's gifts  is  vested,  if  perfect  equity  were  established, 
in  the  whole  human  race  ;  or,  as  a  reasonable  approach 
to  this,  in  that  portion  of  the  public  to  whom  this  gift  is 
a  direct  benefit.  The  title  which  the  public  holds  may 
be  transferred  to  private  individuals,  as  a  matter  of 
expediency  ;  but  the  public  must  still  retain  a  prior 
claim  upon  the  property.  Its  right  to  have  the  property 
used  for  the  general  welfare,  transcends  the  right  of  any 
private  owner  to  direct  it  solely  to  his  own  profit  and  the 
public  injury. 

It  is  thus  plain  that  the  private  ownership  of  our 
natural  wealth  and  of  all  public  franchises  rests  on  the 
grounds  of  expediency  alone.  All  the  lands  and  mineral 
wealth,  all  franchises  for  railway  lines  and  for  the  vari- 
ous public  works  discussed  in  the  chapters  on  municipal 
monopolies  were  the  heritage  of  the  whole  people  in  the 
first  instance,  and  they  have  only  transferred  the  title  to 
private  owners  because  it  seemed  expedient  so  to  do. 


THE   SOVEREIGN  RIGHTS  OF  THE  PEOPLE. 


On  the  grounds  of  expediency  alone,  then,  is  the  private 
ownership  of  natural  wealth  to  be  considered. 

It  can  hardly  be  doubted  that  in  the  case  of  our  own 
country,  the  transfer  to  private  owners  of  the  title  to  our 
natural  resources  has  been  in  the  past  the  wisest  and  only 
proper  course.  It  is  a  fact  not  often  realized  that  the 
title  to  nearly  all  the  natural  wealth  of  the  country,  al- 
most all  the  lands  and  mines  and  forests,  has  been  held 
directly  by  the  public  within  a  century,  and  that  the 
transfer  to  private  owners  of  a  great  part  of  it  has  taken 
place  within  a  generation. 

The  question  now  comes  :  Did  the  public,  in  transfer- 
ring the  title  to  a  private  owner,  relinquish  all  its  right 
to  the  future  control  of  these  valuable  properties,  as  a 
private  owner  would  have  done  ?  The  answer  must  be 
in  the  negative.  Regarded  simply  as  a  matter  of  expedi- 
ency, it  is  plain  that  to  cause  the  act  of  any  public  offi- 
cial to  bind  all  succeeding  generations,  living  under  dis- 
similar conditions  and  circumstances,  which  were  then 
unknown  and  unprophesied,  might  result  in  unbearable 
evils.  Necessary  as  it  might  be  at  the  start  to  give  away 
valuable  properties  to  meet  present  needs,  one  genera- 
tion or  its  representatives  has  no  conceivable  right  to  sell 
for  a  mess  of  pottage  the  heritage  of  all  succeeding  ones. 
The  fact  is,  then,  that  the  natural  title  to  all  gifts  of  Na- 
ture is  vested  in  the  public  at  large  ;  and  while  it  is  in 
duty  bound  to  observe  the  contracts  which  it  makes  with 
private  parties,  it  is  also  not  to  be  thought  that  the  dis- 
honesty or  incompetence  of  a  public  official,  or  the  fail- 
ure to  foresee  the  future,  can  work  for  too  long  a  time 
an  injury  to  the  community. 

It  seems  certain  that,  in  every  case  where  the  public 
has  transferred  to  private  owners  the  title  to  any  gift  of 


218  MONOPOLIES  AND    THE  PEOPLE. 

Nature,  or  has  conferred  any  franchise  upon  a  corpora- 
tion, under  whatever  conditions,  the  right  of  supreme 
control  still  remains  with  the  natural  owner,  the  public  ; 
and  when  the  need  arises,  this  control  may  be  exercised. 
The  rights  of  the  owners  and  the  contract  obligations 
into  which  the  public  has  entered  should  be  regarded  so 
far  as  possible  ;  but  when  the  public  necessity  demands, 
control  on  its  behalf  can  always  be  exercised. 

This  may  seem  like  a  formidable  and  revolutionary 
doctrine,  but,  in  reality,  it  is  based  on  every-day  acts  of 
the  public  representatives,  with  which  every  one  is  fa- 
miliar. Suppose  it  is  conceived  to  be  for  the  public  in- 
terest that  a  certain  railway  shall  be  built.  To  do  this  it 
is  necessary  to  cross  many  hundred  tracts  of  land,  the 
title  to  which  was  many  years  ago  transferred  by  the 
public  to  private  owners  who  have  bought  and  sold  since 
then  as  they  pleased,  as  if  their  control  were  absolute. 
Many  of  the  owners  of  these  lands  may  be  opposed  to 
parting  with  the  right  of  way  necessary  for  a  railroad,  but 
their  private  wishes  must  not  stop  the  progress  of  im- 
provements necessary  to  the  general  welfare.  The  State, 
which  has  the  natural  title,  asserts  its  right  to  supreme 
control ;  and,  if  necessary,  will  use  all  its  power  to  force 
these  private  owners  to  relinquish  their  land  for  the  pub- 
lic good.  This  is  the  commonest  example  of  the  exercise 
of  the  right  of  eminent  domain,  but  other  cases  frequently 
occur.  The  laying  out  of  city  streets,  building  public 
bridges,  and,  in  fact,  highways  of  every  class,  furnish  a 
similar  example.  Provision  of  public  water  supply  often 
requires  an  exercise  of  this  power  even  more  positive 
than  in  the  cases  just  cited.  By  the  construction  of  one 
great  reservoir  to  store  the  flow  of  the  Croton  water-shed 
for  the  supply  of  New  York  City,  it  is  proposed  to  con- 


THE   SOVEREIGN  RIGHTS  OF  THE  PEOPLE.    2ig 

demn  the  dwellings  and  lands  now  owned  and  occupied 
by  several  thousand  people.  It  is  to  be  noted  that,  in 
every  case,  the  rights  of  the  private  owners  are  observed, 
and  compensation  is  made  them  for  the  damage  done. 

Under  the  common  law  the  owner  of  lands  bordering 
a  running  stream  has  certain  rights  to  its  use  ;  and  these 
riparian  rights,  as  they  are  called,  have  been  established 
by  precedent  for  centuries.  But,  in  the  State  of  Colorado, 
it  was  found  that  the  water  in  the  streams  was  of  such 
value  for  irrigation  that  the  old  system  of  permitting  pri- 
vate ownership  of  these  riparian  rights  led  to  grave 
abuses.  The  State  Constitution,  therefore,  declares  that 
all  water  in  running  streams  is  the  inalienable  property 
of  the  whole  people,  and  the  system  providing  for  its  use 
by  private  parties  is  based  on  this  principle. 

So  much  for  the  power  of  the  public  to  exercise  its 
supreme  control,  when  public  exigency  requires,  over 
Nature's  gifts  in  land  and  water.  As  an  example  of  the 
supreme  control  of  the  public  over  the  franchises  which 
it  grants,  take  the  case  of  the  railway  again.  It  is  well 
established  that  the  public  has  the  right  through  its  legal 
representatives  to  regulate  the  management  and  opera- 
tion of  the  railway  in  every  detail ;  and  not  only  that, 
but  the  rates  which  the  railway  may  charge  for  its  services 
as  well.  Many  other  examples  might  be  given,  for  the 
necessities  of  the  present  decade  have  awakened  men  as 
never  before  to  the  facts  which  we  have  just  discussed. 
The  final  conclusion  must  inevitably  be  that  the  public  as 
the  sole  possible  holder  of  the  natural  title  to  the  gifts  of 
Nature,  while  it  may  find  it  expedient  to  transfer  this  own- 
ership to  private  owners,  retains  always  supreme  control, 
which  may  be  exercised  as  the  public  exigency  demands. 

We  have  next  to  determine  in  what  cases  the  exercise 


220  MONOPOLIES  AND    THE  PEOPLE. 

by  the  public  of  this  right  of  supreme  control  over  its 
heritage  is  demanded.  We  are  greatly  aided  here,  how- 
ever, by  the  thorough  study  we  have  made  of  the  laws  of 
competition.  It  is  evident  at  once  that  competition  in 
the  case  of  natural  agents  acts  according  to  the  laws 
already  found.  Agricultural  land  in  this  country  is  so 
abundant  and  its  ownership  is  so  widely  diffused  that 
any  monopoly  of  it  is  now  impossible.  Each  farmer 
competes  with  every  other  farmer,  and  the  extension  of 
transportation  facilities  has  so  broadened  the  field  of  com- 
petition that  in  no  industry  is  the  day  when  the  few  com- 
peting units  shall  replace  the  many,  and  monopoly  shall 
ensue,  farther  off  than  in  this.  In  Great  Britain  and  Ire- 
land opposite  conditions  prevail.  A  limited  amount  of 
land  is  held  by  a  few  owners,  and  its  rental  is  fixed  with- 
out competition  ;  consequently  the  land  question  has  been 
almost,  if  not  quite,  the  chief  issue  in  British  politics 
during  this  decade. 

If  we  examine  Nature's  gifts  to  the  world  in  the  shape 
of  metals,  we  find  iron  to  be  so  widely  distributed  that 
competition  has  always  acted  to  reduce  profits,  and  that 
combinations  to  restrict  competition  in  the  production  of 
the  metal  have  only  recently  become  even  possible.  On 
the  other  hand,  the  workable  deposits  of  copper  are  so 
scarce  and  the  number  of  competitors  in  its  production 
is  so  much  smaller,  that  it  has  become  the  subject  of  the 
greatest  monopoly  the  world  has  ever  seen. 

With  these  examples — and  any  number  of  others 
might  be  cited — is  it  not  plain  enough  that  the  laws 
of  competition  are  exactly  applicable  to  aid  in  solv- 
ing the  problem  ?  The  smaller  the  number  of  com- 
peting units,  the  stronger  the  tendency  to  monopoly. 
Certain  gifts  of  Nature  are  given  to  us  in  profu- 


THE   SOVEREIGN  RIGHTS  OF  THE  PEOPLE.    221 

sion.  The  people  transfer  the  title  to  private  own- 
ers, and  of  these  there  must  of  necessity  be  so  many 
that  they  will  compete  steadily  with  each  other.  The 
consequence  is  that  the  people  receive  the  benefit  from 
the  country's  natural  resources,  while  the  private  owner 
gets  only  enough  to  compensate  him  reasonably  well  for 
the  labor  he  employs  and  the  capital  which  he  invests. 
Certain  other  gifts  of  Nature  are,  as  we  have  found,  very 
scarce  ;  the  number  of  men  who  can  own  and  use  them 
and  compete  with  each  other  in  offering  their  advantages 
to  the  public  is  necessarily  small.  The  inevitable  result 
of  this  condition  is,  first,  intense  competition  and  then 
monopoly. 

It  is  thus  evident  that  there  is  no  necessity  for  the 
State  to  interfere  with  the  private  ownership  of  those 
gifts  of  Nature  which  are  so  widely  distributed  that  com- 
petition can  act  for  the  protection  of  the  public.  As  re- 
gards those  other  gifts  which  are  so  limited  in  their  ex- 
tent that  their  control  has  become  a  matter  of  monopoly, 
the  right  of  the  public  to  exercise  its  control  is  already 
proven.  Whether  in  any  given  case  the  exigency  is  so 
great  as  to  call  for  the  assertion  of  this  power,  is  a  ques- 
tion which  must*  be  decided  in  each  case  separately. 

It  may  be  objected,  with  truth,  that  nothing  short  of 
the  actual  ownership  of  all  Nature's  gifts  by  the  public  is 
in  accord  with  absolutely  perfect  justice  ;  but  as  a  mat- 
ter of  fact  every  human  work  carried  out  by  human 
hands  and  brains  is  only  an  approach  to  perfection.  It 
will  never  be  possible  by  any  human  agency  to  distribute 
the  wealth  production  of  the  world  with  absolute  equity. 
A  careful  writer  says  :  "  The  view  that  the  right  of  every 
human  being  to  his  share  in  the  gifts  of  Nature  should  be 
recognized  is  not  an  unreasonable  one."  But  by  nosys- 


222  MONOPOLIES  AND    THE  PEOPLE. 

tern  possible  of  putting  into  practical  execution  can  these 
gifts  be  equitably  divided  among  all  men.  What  can  be 
done  is  to  cause  the  benefit  of  these  gifts  to  be  widely  dis- 
tributed, and  to  prevent  them  from  being  monopolized 
for  the  benefit  of  a  few. 

The  fact  maybe  alluded  to,  that  even  under  widespread 
competition  the  holders  of  the  most  favorably  situated 
and  richest  lands,  mines,  etc.,  receive  a  benefit  which  in 
absolute  equity  should  be  divided  among  all  men.  But 
the  vastly  more  important  matter  of  the  monopolies  which 
prevent  the  public  from  obtaining  the  benefit  of  the 
natural  resources  to  which  it  holds  an  inalienable  title, 
so  overshadows  such  trivial  injustices  that  they  may  be 
neglected.  So  much  attention  has  been  called  of  late, 
however,  to  the  fact  that  land  as  a  gift  of  Nature  should, 
if  absolute  justice  were  done,  have  the  benefit  from  its 
use  equally  divided  among  all  men,  that  something  fur- 
ther on  this  subject  may  be  said. 

Let  us  first  note  the  fact,  which  no  one  will  dispute* 
that  the  title  held  by  the  public  refers  only  to  the  "  site 
value."  The  value  of  all  improvements  which  are  the 
product  of  labor  belongs  to  the  owner  by  natural  right. 
Now  it  is  conceivable  that  of  the  total  value  of  $10,- 
197,000,000  at  which  the  farms  of  the  United  States 
were  valued  at  the  last  census,  $7,000,000,000  may  per- 
haps have  been  the  value  of  the  land  apart  from  the 
value  of  the  buildings  and  improvements  made  since  the 
country  was  settled.  In  1880  there  were  at  least  3,500,- 
ooo  farmers  who  owned  agricultural  lands.  It  is  a  well- 
known  fact  that  the  holding  of  agricultural  land  in  large 
parcels  is  the  rare  exception.  We  may  reasonably  con- 
clude, therefore,  that  the  "  site  value "  held  by  each 
farmer  was  about  $2,000.  This  is  the  sum  which  in 


THE   SOVEREIGN  RIGHTS  OF  THE  PEOPLE.    22$ 

absolute  equity  is  said  to  belong  to  the  public  at  large 
But  let  us  reflect  that  each  fanner  has  only  received  a 
small  proportion  of  this  $2,000  through  the  increase  in 
the  value  of  his  land.  The  fact  is  that  the  land  which 
at  first  was  actually  valueless  has  increased  in  value  with 
each  generation,  and  it  is  this  increase  alone,  apart  from 
the  increase  due  to  the  betterments,  after  which  the 
public  has  any  right  to  inquire.  Remembering  the  num- 
ber of  sales  and  changes  in  the  ownership  which  take 
place  in  this  country,  how  often  the  benefits  which  have 
accrued  to  a  single  property  are  divided  up  among  a 
number  of  heirs,  and  that  each  owner  represents  on  the 
average  a  family  of  three  individuals,  it  seems  reasonable 
to  suppose  that  this  increase  in  the  "  site  value  of  each 
farm  may  have  been  divided  among  twenty  different  per- 
sons. Thus,  while  the  statement  may  be  made  that  the 
public  has  a  claim  upon  the  farms  of  the  country  of  $7,- 
000,000,000,  it  must  be  remembered  that  this  sum  has 
been  divided  among  about  70,000,000  different  people,  and 
that  this  division  has  been  in  progress  for  over  two  cen- 
turies. When  the  benefits  of  our  natural  resources  are 
so  widely  distributed  as  this,  there  can  be  little  occasion 
to  alarm  ourselves  regarding  injustice  through  the  private 
control  of  farming  lands. 

This,  however,  is  somewhat  apart  from  our  argument. 
The  main  point,  of  which  we  must  not  lose  sight,  is  that 
the  private  ownership  of  those  gifts  of  Nature  which  are 
widely  distributed  operates  to  the  general  benefit  of  the 
community  far  more  than  any  system  of  public  owner- 
ship that  could  be  devised.  But,  on  the  other  hand,  in 
the  case  of  natural  agents  limited  in  amount,  it  is  practi- 
cally certain  that  sooner  or  later  a  monopoly  will  be 
established  by  their  private  owners,  to  the  serious  detri- 


224  MONOPOLIES  AND    THE  PEOPLE. 

ment  of  the  public  at  large.  The  sovereign  right  of  the 
public  in  this  latter  case  to  take  such  steps  as  are  neces- 
sary for  its  proper  protection,  is  something  which  both  a 
priori  reasoning  and  judicial  decisions  amply  prove. 

The  great  problem  of  monopoly  would  be  a  far  easier 
one  to  solve,  both  theoretically  and  practically,  were  it  as 
easy  to  regulate  justly  those  forms  of  monopoly  whose 
strength  lies  in  combination  only,  as  it  is  those  whose 
power  depends  on  the  possession  of  gifts  of  Nature, 
which  we  have  just  considered.  In  dealing  with  trusts, 
monopolies  in  trade,  and  labor  monopolies,  we  are  in 
danger,  on  the  one  hand,  of  sanctioning  oppressive  inter- 
ference with  private  business,  and  on  the  other  of  per- 
mitting a  license  in  the  conduct  of  private  business  which 
encourages  its  managers  to  continue  to  extort  unjust  gains 
from  the  public.  In  the  face  of  this  difficulty,  which 
careful  consideration  shows  to  be  very  serious,  and  in 
the  dread  of  other  evils,  such  as  the  government  proving 
incompetent  to  safely  undertake  these  new  and  strange 
responsibilities,  we  may  well  feel  like  trying  to  get  along 
with  the  aid  of  those  old  defenses  against  monopolies 
that  have  always,  until  the  modern  concentration  of  in- 
dustry was  accomplished,  been  ample  to  hold  them  in 
check. 

But  the  one  argument  which  prevents  this  is  the  fact 
that  this  tendency  to  concentration  and  consolidation  is 
still  actively  at  work.  In  the  words  of  Prof.  Ely  :  "  Pro- 
duction on  the  largest  possible  scale  will  be  the  only 
practical  mode  of  production  in  the  near  future."  It  is 
for  this  reason  that  we  must  not  cease  to  look  about  for 
some  better  protection  against  this  new  class  of  monopo- 
lies than  are  afforded  by  merely  placing  stumbling-blocks 
in  their  way.  We  shall  have  need,  for  many  years  yet, 


THE   SOVEREIGN  RIGHTS  OF  THE  PEOPLE.    22$ 

of  such  weapons  in  fighting  monopoly  as  the  public  is 
already  familiar  with  ;  the  creation  of  new  competitors 
and  their  support  by  public  opinion,  judicial  decisions 
against  combinations,  and  the  like.  But  before  these  grow 
absolutely  useless,  we  ought  to  be  prepared  to  meet  the 
new  conditions  of  industry  with  something  better  than 
mere  opposition  ;  and  even  now  be  experimenting  and 
studying  upon  a  permanent  and  consistent  policy. 

In  attempting  to  control  monopolies  which  are  not 
dependent  on  natural  agents  for  their  strength,  we  are 
met  at  once  by  the  declaration  that  the  government  has 
no  power  or  right  to  interfere  with  property  which  is  the 
product  of  labor  ;  and  that  the  owner  cannot  be  pre- 
vented from  making  such  disposition  of  it  as  he  chooses. 
The  President  and  Counsel  of  the  Sugar  Trust  said  after 
Judge  Barrett's  decision  was  announced:  "We  do  not 
believe  that  the  law  prevents  two  persons  engaged  in 
rivalry  with  each  other  from  uniting  their  interests." 
This  seems  indeed  true  ;  and  yet,  on  reflection,  it  appears 
to  be  absolutely  certain  that  power  must  reside  in  the 
sovereign  people  to  protect  themselves  from  the  unjust 
taxation  which  a  monopoly  may  seek  to  enforce.  Let 
us  brush  away  cobwebs  and  set  the  facts  clearly  before 
us.  That  competition  among  producers  is  the  sole 
present  protection  of  the  public  against  extortionate 
prices  is  undoubted.  When  by  combination  this  defense 
is  abolished,  has  not  the  public  a  right  to  adopt  some 
other  means  of  protection  ?  There  can  be  no  doubt 
that  it  has  ;  the  only  question  is,  what  form  should  that 
protection  take  ? 

It  must  be  plain  that,  as  a  general  rule,  it  is  unfitting 
that  government  should  own  and  operate  industrial 
establishments.  Practical  experience  has  indicated  that 


226  MONOPOLIES  AND    THE  PEOPLE. 

this  experiment  is  wellnigh  certain  to  result  in  failure, 
for  reasons  so  evident  as  to  require  no  mention  here. 
The  only  alternative  remaining  is  government  regulation 
with  private  ownership  and  management.  The  essential 
features  in  the  adoption  of  any  plan  should  be  that  the 
returns  of  the  private  owner  should  be  in  proportion  to 
the  skill  and  economy  which  he  exercises  in  managing 
his  business  ;  that  competition  and  its  resulting  waste  be 
done  away  with  ;  and  that  the  industry  be  placed  on 
such  a  safe  and  stable  basis  that  the  capital  invested  in 
it  shall  receive  the  lowest  possible  rate  of  interest,  thus 
leaving  the  greatest  possible  amount  for  the  payment  of 
wages  of  labor  and  permitting  sales  of  the  product  at  a 
low  price. 


XVI. 

PRACTICAL  PLANS   FOR  THE  CONTROL  OF 
MONOPOLIES. 

THE  investigation  of  the  preceding  chapters,  leading 
up  to  the  final  conclusion  that  the  proper  and  only  wise 
remedy  for  the  evils  of  monopoly  lies  in  direct  action  of 
the  government  to  protect  the  rights  of  the  people,  fin- 
ishes the  chain  of  our  argument  and  really  accomplishes 
the  work  laid  out  in  the  opening  chapter.  The  laws 
which  we  have  found  to  govern  competition  in  modern 
industry  are  so  far-reaching  in  their  effects,  and  their  cor- 
rect apprehension  by  the  people  at  large  is  so  important 
to  the  general  welfare,  that  economists  ought  to  unite  in 
recognizing  and  teaching  their  truth,  while  all  who  desire 
to  work  for  the  alleviation  of  present  crying  evils  of 
society  should  understand  these  laws  and  be  guided  by 
them. 

In  the  practical  application  of  these  truths,  however, 
so  many  complicated  details  are  involved  that  there  is 
ample  reason  for  the  widest  differences  of  opinion.  To 
decide  intelligently  upon  these  practical  methods  de- 
mands special  knowledge,  in  order  that  all  necessary- 
details  may  be  provided  for,  and  rare  practical  judgment 
to  adapt  the  method  to  the  means  at  hand. 

The  investigations  which  the  author  has  pursued  in  the 
preparation  of  the  preceding  chapters  and  for  certain 

227 


228  MONOPOLIES  AND    THE  PEOPLE. 

other  purposes  have  suggested  to  him  certain  principles 
in  the  practical  execution  of  plans  for  the  control  of 
various  monopolies,  which  seem  to  him  necessary  to  suc- 
cess in  the  work.  Well  understanding  the  fallibility  of 
any  one  man's  judgment,  especially  in  these  matters  of 
detail,  he  has  determined  to  outline  in  a  brief  way  what 
seem  to  him  the  most  feasible  plans  for  the  control  of 
each  class  of  monopolies.  These  suggestions,  however, 
are  to  be  regarded  in  an  entirely  different  light  from  the 
general  laws  propounded  in  the  preceding  chapters  ;  and 
they  are  presented  with  a  full  knowledge  of  the  fact  that 
slight  variations  in  circumstances  may  necessitate  wide 
changes  in  plans  and  processes. 

Taking  up  the  monopolies  which  by  their  use  of  nat- 
ural agents  or  their  exercise  of  a  franchise  granted  by  the 
public,  are  already  acknowledged  to  be  subject  to  the 
public  control,  let  us  consider  first  the  railway  system. 
The  two  years  in  which  the  Interstate  Commerce  law  has 
been  in  force  have  seen  a  great  progress  toward  the  final 
solution  of  this  problem,  even  though  railway  affairs  are 
at  present  in  so  unsatisfactory  a  condition.  The  import- 
ant features  of  our  future  policy  which  now  seem  to  be 
quite  generally  understood  are  :  full  State  and  national 
control  over  both  tariff  rates  and  facilities  ;  the  abolition 
of  competition,  either  by  consolidation  or  by  legalized 
agreements  to  that  end  ;  and  strict  prohibition  of  the  con- 
struction of  parallel  lines  not  warranted  by  the  traffic. 

That  we  are  working  very  rapidly  in  this  direction,  no 
one  will  deny  who  is  familiar  with  the  progress  of  legis- 
lation affecting  railway  interests  and  with  the  opinions  of 
railway  men.  Evidently,  however,  government  cannot 
justly  take  so  prominent  a  part  in  railway  management 
without  becoming  in  some  degree  responsible  to  railway 


PLANS  FOR  THE   CONTROL   OF  MONOPOLIES.    229 

stock-  and  bond-holders  for  the  protection  of  their  inter- 
ests ;  and  it  is  a  difficult  question  to  say  in  what  manner 
this  responsibility  should  be  met.  It  has  been  the  inten- 
tion of  the  author  in  devising  the  following  plan  for  the 
control  of  our  railway  system  to  make  this  responsibility 
a  definite  one,  and  not  leave  it  as  now,  a  vague  constitu- 
tional right.  For  according  to  the  law  at  present,  State 
and  national  legislators  may  make  laws  to  vary  the  re- 
ceipts and  expenditures  of  the  railway  companies  as 
much  as  they  please,  and  the  only  redress  of  the  railway 
owner  is  an  appeal  to  the  courts,  the  judges  of  which 
must  decide  whether  the  company's  revenue  is  so  injured 
that  its  legal  rights  are  infringed. 

Space  will  not  permit  here  a  full  statement  of  the  many 
serious  evils  and  abuses  with  which  our  present  system 
of  railway  management  is  burdened.  The  study  which 
the  author  has  made  of  them  has  convinced  him  of  their 
importance  and  magnitude.  The  following  plan  is  de- 
signed to  permit  their  remedy  as  well  as  to  remedy  the 
special  evils  of  monopoly  with  which  our  present  investi- 
gation is  concerned  : 

Let  the  government  acquire  the  title  to  the  franchise, 
permanent  way,  and  real  estate  of  all  the  railway  lines  in 
the  country.  Let  a  few  corporations  be  organized  under 
government  auspices  ;  and  let  each,  by  the  terms  of  its 
charter,  receive  a  perpetual  lease  of  all  the  railway  lines 
built  or  to  be  built  within  a  given  territory.  Let  the  ter- 
ritory of  each  of  these  corporations  be  so  large  and  so 
planned  with  regard  to  its  neighbors  that  there  shall  be, 
so  far  as  possible,  no  competition  between  them.  For  in- 
stance, one  corporation  would  operate  all  lines  south  of 
the  Ohio  and  east  of  the  Mississippi  rivers  ;  another  all 
lines  east  of  the  Hudson  and  of  Lake  Champlain,  etc.  Let 


230  MONOPOLIES  AND    THE  PEOPLE. 

the  terms  of  rental  of  these  lines  be  about  3^  per  cent, 
on  the  road's  actual  "present  cost  "  (the  sum  of  money 
it  would  cost  to  rebuild  it  entirely  at  present  prices  of 
material  and  labor)  less  a  due  allowance  for  deprecia- 
tion. The  corporations  would  be  obliged  to  keep  the 
property  in  as  good  condition  as  when  received,  and 
would  own  absolutely  all  their  rolling  stock,  ma- 
chinery, etc. 

It  is  not  proposed,  however,  that  the  government  shall 
own  any  interest  in  the  railways  save  the  legal  title. 
Bonds  would  be  issued  to  the  full  amount  of  the  ap- 
praised valuation,  running  twenty-five  years  and  bearing 
interest  at  3  per  cent.,  principal  and  interest  guaranteed 
by  the  government,  and  these  would  be  sold  to  the  high- 
est bidder.  Thus  the  real  ownership  of  the  roads  would 
be  vested  in  the  bondholders.  As  is  well  known,  there 
is  a  great  and  fast  increasing  need  for  investments  of 
absolute  safety,  even  though  they  bear  very  low  rates  of 
interest.  This  is  especially  desirable  for  the  continuance 
of  our  national  banking  system,  in  order  to  insure  us  a 
safe,  stable,  and  ample  currency.  Such  bonds  would  find 
a  market  at  a  premium  as  fast  as  offered. 

It  would  not  even  be  necessary  that  the  money  to  pay 
the  interest  coupons  should  pass  through  the  govern- 
ment's hands.  The  operating  company  would  pay  it 
directly  to  the  bond-holder  and  at  the  same  time  the 
\  of  i  per  cent,  would  be  paid  into  the  government 
treasury. 

The  object  in  making  the  bonds  run  for  no  longer  time 
than  twenty-five  years,  when  it  is  intended  that  the  whole 
value  of  the  road  shall  be  perpetually  held  in  the  form 
of  bonds,  is  that  at  proper  intervals  a  revaluation  may 
be  made  of  the  improvements  to  the  road  and  the  inter- 


PLANS  FOR   THE    CONTROL   OF  MONOPOLIES.   231 

est  charges  may  be  readjusted  to  correspond  with  the 
general  change  in  the  income  from  capital.  When  the 
bonds  fall  due,  a  new  block  would  be  issued  and  sold  to 
the  highest  bidder.  The  interest  rate  should  be  set  at 
such  a  point  that  the  bonds  could  be  sold  at  a  premium. 
These  premiums,  with  the  \  of  i  per  cent,  on  the  bonds, 
paid  by  the  operating  company  to  the  government, 
(which  we  may  regard  as  a  legitimate  fee  to  the  gov- 
ernment for  its  guaranty)  should  form  a  government 
railway  fund.  This  should  be  used,  first,  to  defray  the 
expenses  of  the  government  department  of  railways,  and 
second,  to  pay  the  deficit  when  on  any  line  the  net  re- 
ceipts after  operating  expenses  are  paid  are  insufficient 
to  pay  the  rental.  The  remainder  should  be  expended  in 
making  improvements  and  additions  to  the  railway  sys- 
tem, such  as  building  new  bridges  and  stations,  and  im- 
proving the  line,  the  cost  of  which,  however,  should  be 
represented  by  additional  bonds  at  the  end  of  the  twenty- 
five-year  term.  The  amount  of  income  should  be  so  regu- 
lated, by  varying  the  rate  of  interest  on  new  bonds,  that 
the  sum  remaining  for  the  last  purpose  may  be  about 
sufficient  for  usual  needs.  The  whole  administration  of 
the  receipt  and  expenditure  of  this  fund  should  be  vested 
in  the  government  department  of  railways.  In  this  way 
the  danger  that  the  whole  work  of  this  government  depart- 
ment might  be  blocked  through  the  neglect  of  Congress 
to  make  necessary  appropriations,  would  be  avoided. 

The  readjustment  of  existing  stocks  and  bonds  pre- 
sents difficulties  which  will  be  considered  in  very  differ- 
ent ways  by  different  classes  of  persons.  The  "  gran- 
ger "  element,  for  instance,  would  cut  off  the  holder  of 
"  watered  stock  "  with  a  shilling.  Fortunately,  if  we 
take  time  enough,  we  can  arrange  this  matter  with  no 


232  MONOPOLIES  AND    THE  PEOPLE. 

shadow  of  injustice.  To  illustrate  :  The  government 
can  purchase  the  A.  B.  &  C.  road  outright  at  its  market 
value,  which,  owing  to  inflated  prices  and  watered  se- 
curities, is  perhaps  $3,000,000.  It  is  desired  to  wipe  out 
$1,000,000  of  this  to  place  the  road  upon  its  proper 
basis.  The  government  issues  3  per  cent,  guaranteed 
ten-year  bonds  upon  the  road  and  leases  it  at  an  annual 
rental  of  6  per  cent,  on  what  it  has  paid.  At  the  time 
the  bonds  are  due,  the  accumulation  of  rentals  over  in- 
terest is  more  than  sufficient  to  pay  off  $1,000,000  of 
the  bonds,  while  the  remainder  are  renewed  on  the  per- 
manent basis. 

The  author  is  well  aware  that  a  very  strong  preju- 
dice exists  against  the  lending  by  the  government  of 
its  credit  to  private  corporations.  This  prejudice — 
which  has  perhaps  already  been  sufficient  to  condemn 
the  plan,  as  thus  far  presented,  in  the  mind  of  the 
reader — he  believes  to  be  a  very  wise  and  well  founded 
one.  The  assumption  by  the  government  of  any  risk  in 
connection  with  corporate  enterprise  is  highly  undesira- 
ble. It  is  now  to  be  noted  that  this  objection  is  wholly 
overcome  ;  for,  notwithstanding  the  fact  that  the  govern- 
ment guarantees  the  bonds  of  the  railways,  it  is  not  pro- 
posed that  it  shall  really  assume  any  risk,  as  will  be  seen 
from  the  further  description  of  the  powers  and  obliga- 
tions of  the  operating  corporations. 

These  should  be  essentially  private  companies,  but 
there  should  be  two  or  three  representatives  of  the  gov- 
ernment on  the  Board  of  Directors.  They  should  be  re- 
quired to  operate  the  roads  in  a  safe,  efficient,  and  eco- 
nomical manner,  and  to  keep  accurate  and  simple  records, 
open  to  the  inspection  of  the  Government  Commission- 
ers, of  the  receipts  and  expenditures  on  every  separate 


PLANS  FOR  THE   CONTROL    OF  MONOPOLIES.   233 

line  of  road.  The  rates  of  fare  and  freight  should  be, 
first  of  all,  stable.  When  once  fixed  they  should  neither 
be  raised  nor  lowered  except  by  the  direction  of  the  Gov- 
ernment Railway  Commissioners.  Next — and  this  is 
the  cardinal  feature  of  the  whole  plan — it  should  be  the 
endeavor  to  fix  the  rates  of  fare  and  freight  at  such  a 
point  that  the  total  receipts  would  be  sufficient,  first,  to 
pay  the  whole  expense  of  operating  and  maintaining  the 
road  ;  second,  to  pay  the  annual  rental  of  3^  per  cent, 
interest  on  the  cost  of  the  road  ;  and,  third,  an  annual 
dividend  to  the  stockholders  of  the  operating  company 
of  from  4  to  8  per  cent.  The  capital  stock  of  the  oper- 
ating company  should  be  fixed  by  law  at  about  i  \  times 
the  actual  cost  of  rolling  stock  and  machinery.  The 
operating  company  should  be  allowed  to  issue  only  one 
class  of  securities,  and  these  should  represent  at  par  the 
actual  cash  capital  invested  by  the  operating  company. 

Under  this  plan  it  is  evident  that  every  community 
would  pay  its  equitable  share  of  the  cost  of  transporta- 
tion, since  the  rates  would  be  based  on  the  cost  of  ser- 
vice.1 Instead  of  roads  running  along,  bankrupt  for 

1  It  should  be  explained  that  it  is  only  proposed  to  base  the  rates 
as  a  whole  upon  the  cost  of  service.  As  regards  the  relative  rates 
on  different  commodities,  the  author,  in  common  with  all  who  have 
given  careful  study  to  the  question,  recognizes  that  the  only  equitable 
principle  for  proportioning  rates  is  the  much  maligned  one  of  "  charg- 
ing [in  proportion  to]  what  the  traffic  will  bear."  The  argument  against 
this  principle  is  so  very  plausible  that,  until  he  had  given  the  subject 
thorough  study  he  held  a  diametrically  opposite  opinion. 

To  make  plain  to  the  reader  that  this  is  really  the  only  equitable 
principle,  the  following  illustration  may  serve  :  A  coal-mine  operator 
and  a  sewing-machine  manufacturer  build  together  a  railroad  to  carry 
their  respective  products  to  a  market.  They  will  fix  the  total  rates 
of  freight  at  such  a  point  as  to  just  pay  the  cost  of  service  ;  but  it  is 
required  to  find  what  relative  rates  each  should  be  equitably  charged 


234  MONOPOLIES  AND    THE  PEOPLE. 

years,  as  now,  we  would  have  every  community  paying 
for  its  transportation  facilities  just  what  it  cost  to  fur- 
nish them.  But  if,  on  any  road,  such  a  rule  would  raise 
the  rates  above  a  certain  prescribed  maximum  point, 
then  the  rate  could  be  lowered,  if  necessary,  to  a  point 
where  it  was  only  great  enough  to  pay  the  operating  ex- 
penses ;  and  part  or  all  the  bond  interest  would  be  paid 
out  of  the  government  railway  fund. 

"  But,"  the  objector  says,  "  is  it  not  true  that  when 
you  limit  the  profits  of  the  companies  and  base  rates 
on  cost  of  service  you  take  away  all  incentive  to  econ- 
omy and  careful  operation  ?  The  public,  and  not  the 
company,  gain  if  the  cost  of  service  is  reduced ;  so 
why  should  the  manager  exert  himself  to  economize  ? 
This  very  same  principle  has  been  tried.  Many  States 
have  chartered  railway  corporations,  and  provided  that 
fares  and  freight  rates  should  be  reduced  when  dividends 
exceeded  a  certain  per  cent.,  or  else  that  a  percentage  of 
the  surplus  earnings,  above  the  amount  necessary  to  earn, 
say  10  per  cent,  dividends,  should  be  paid  into  the  State 
treasury.  Of  course  the  railway  corporations  who  have 
been  able  to  earn  surplus  dividends  which  they  were  not 
permitted  to  pay,  have  been  sharp  enough  to  spend  their 
surplus  on  their  own  property  instead  of  turning  it  over 
to  the  State  treasury.  How  is  it  possible,  then,  to  base 
rates  on  cost  of  service  and  still  leave  the  incentive  to 

on  the  shipments  from  his  works.  Evidently,  to  have  the  rates  per- 
fectly equitable,  they  must  be  in  exact  proportion  to  the  benefit  which 
each  party  derives  from  the  use  of  the  road.  But  this  benefit  which 
each  derives  is  measured  by  the  profits  which  each  makes  from  his 
business  ;  and  this  profit,  in  turn,  is  the  measure  of  the  amount  each 
can  afford  to  pay  for  the  use  of  the  road, — that  is  to  say,  "what  the 
traffic  will  bear."  O_.  E.  D. 


PLANS  FOR  THE   CONTROL   OF  MONOPOLIES.   235 

economy,  frugality,  and  efficiency  which  exists,  when  the 
corporation  is  permitted  to  make  all  the  profits  it  can  ?  " 

To  discover  a  means  of  overcoming  this  difficulty,  let 
us  see  how  it  is  overcome  under  competition.  A  man 
invents  a  new  machine,  for  instance,  which  effects  a 
saving  in  the  cost  of  some  manufacturing  process  of  50 
per  cent.  One  manufacturer  adopts  it  because  it  greatly 
increases  his  profits,  and  one  by  one  his  competitors  fol- 
low suit.  The  competition  between  them  cuts  the 
prices  lower  and  lower,  till  finally  the  consumers  of  the 
goods  get  all  the  benefit  from  the  saving  effected  by  the 
new  machine,  and  the  manufacturers'  profits  are  no 
greater  than  they  were  originally.  But  the  important 
point  to  be  noted  is  this,  that  the  benefit  to  the  manu- 
facturer continued  long  enough  to  repay  him  for  intro- 
ducing the  machine.  So  in  our  attempts  to  base  railway 
rates  upon  cost  of  service,  we  must  permit  the  profit 
from  the  introduction  of  economies,  the  use  of  improved 
appliances,  etc.,  to  be  gathered  by  the  railway  company 
long  enough  to  induce  it  to  work  toward  that  end. 

All  we  need  to  do  to  effect  this  end  is  to  somewhat  de- 
lay the  change  in  rates  to  correspond  to  change  in  cost 
of  service.  As  already  stated,  it  is  most  necessary  that 
rates  should  be  stable,  and  it  is  proposed  to  make  any 
change,  either  advance  or  reduction,  only  through  the 
action  of  a  Government  Commission.  Now,  suppose 
that  some  such  clause  as  this  forms  a  part  of  our  rail- 
way law  :  "  upon  the  petition  of  any  railway  corporation, 
or  of  not  less  than  twenty-five  patrons  of  any  single 
'  railway  district,'  it  shall  be  the  duty  of  the  Railway 
Commission  to  investigate  regarding  a  readjustment  of 
rates  to  correspond  more  closely  to  the  cost  of  service. 
If  it  shall  be  found  that  in  the  given  'railway  district' 


236  MONOPOLIES  AND    THE  PEOPLE. 

the  net  receipts  over  the  operating  expenses  and  fixed 
charges  have  been  for  one  year  not  less  than  9  per 
cent,  on  the  capital  of  the  operating  company  invested 
in  the  given  railway  district ;  and  that  for  two  successive 
years  they  have  been  not  less  than  8  per  cent.;  or,  if 
they  have  been  for  one  year  8  per  cent.,  and  for  two 
years  7  per  cent.,  and  it  shall  be  proven  to  the  satisfac- 
tion of  the  Commission,  that  any  due  and  proper  meas- 
ure of  economy,  to  which  the  attention  of  the  officers 
was  called  in  writing  has  been  wilfully  neglected,  or  that 
any  uncalled  for  and  manifestly  extravagant  expenditures 
have  been  entered  into  during  that  time,  then  it  shall  be 
the  duty  of  the  Commission  to  lower  the  rates.  If  it 
shall  be  found  that  for  one  year  the  net  earnings  have 
been  less  than  3^  per  cent.,  and  for  two  years  less  than 
4^  per  cent.,  unless  it  shall  be  proven  that  this  deficit 
has  been  fostered  by  neglect  of  due  economy,  or  by 
extravagant  expenditure  as  aforesaid,  the  rates  shall  be 
raised.  In  all  cases  where  rates  are  readjusted,  it  shall 
be  the  endeavor  of  the  Commission  to  set  them  at  such  a 
point  that  the  net  earnings  will  equal  6  per  cent,  on  the 
capital  stock." 

The  provision  requiring  two  years  of  excess  or  defi- 
ciency before  a  change,  would  be  necessary  to  avoid  the 
fluctuations  which  occur  in  single  seasons.  Every  piece 
of  economy  is  so  much  gain  to  the  stockholders,  and  its 
benefit  is  received  for  at  least  two  years.  It  must  be 
remembered  that  in  any  railway  corporation,  as  at  present 
conducted,  none  but  the  highest  of  the  managing  offi- 
cials have  any  personal  interest  in  the  profit  from  oper- 
ations. It  may  well  be  believed,  therefore,  that  the 
measure  of  economy  and  efficiency  effected  would  be  at 
least  as  great  as  now.  As  this  plan  also  contemplates 


PLANS  FOR  THE   CONTROL   OF  MONOPOLIES.    237 

government  representation  on  the  Board  of  Directors, 
any  action  by  the  higher  officials  to  evade  the  law  would 
be  unlikely  to  occur. 

The  receipts  of  a  company  operating  say  30,000  miles 
of  railway  and  carrying  its  traffic  at  fixed  rates  would 
vary  but  little  from  year  to  year  ;  and  its  stock  would  be 
so  largely  held  by  investors  and  would  vary  so  little 
in  price  that  there  would  be  very  little  speculation  in 
it.  To  bankrupt  the  company  would  be  an  impossi- 
bility, since  its  receipts  would  always  be  regulated  to 
preserve  its  revenue,  although  not  so  strictly  but  that 
the  company  would  still  have  every  incentive  to  cul- 
tivate traffic  by  offering  good  facilities,  and  to  econo- 
mize at  the  same  time  by  the  introduction  of  improved 
methods. 

No  doubt  it  can  be  shown  where  every  detail  of  the 
foregoing  plan  leaves  loop-holes  for  abuses  to  creep  in. 
It  will  be  much  the  same  with  any  plan  whatever.  The 
questions  to  be  asked  are,  would  abuses,  waste  and 
stealing  be  any  more  likely  to  occur  than  under  any 
other  plan  ?  Could  they  be  any  more  prevalent  than 
they  are  now, — bearable  only  because  we  are  calloused 
to  them  ?  Of  course,  the  foregoing  is  a  mere  outline  of 
the  general  principles  of  the  plan.  Details  which  read- 
ily suggest  themselves  would,  of  course,  be  necessary  to 
carry  out  the  principle  successfully. 

That  some  attempt  should  be  made  in  this  connection 
to  solve  the  perplexing  problem  of  strikes  on  railway 
lines  is  proven  by  the  memorable  engineers'  strike  on 
the  Chicago,  Burlington,  &  Quincy  system.  Perhaps  a 
provision  requiring  every  employe  and  officer  to  hold  at 
least  a  certain  number  of  shares  in  the  operating  com- 
pany in  proportion  to  his  salary  would  help  to  solve 


238  MONOPOLIES  AND    THE  PEOPLE. 

the  labor  problem  ;  and  it  might  give  the  higher  officers 
a  greater  interest  in  their  work  than  they  always  show. 

The  author  has  deemed  it  worth  while  to  outline  the 
foregoing  plan  for  the  equitable  control  of  railway  mo- 
nopolies with  considerable  fulness,  because,  to  a  very 
great  extent,  the  principles  followed  in  the  design  of  this 
plan  are  applicable  to  a  great  number  of  other  monop- 
olies. These  important  principles  are  :  (i)  Government 
protection  to  the  owners  of  fixed  capital  so  that  the  pub- 
lic may  obtain  the  use  of  it  at  the  lowest  possible  rate  of 
interest.  (2)  The  operation  of  monopolies  by  corpora- 
tions rather  than  by  the  government,  thus  securing  the 
increased  efficiency  of  private  over  official  management. 
(3)  Securing  to  the  people  at  large  the  benefit  of  the 
monopoly  by  basing  the  prices  for  its  product  on  cost 
of  service.  (4)  But  leaving  a  suitable  incentive  for  the 
company's  managers  to  maintain  economy  and  efficiency 
in  its  operations.  (5)  Government  representation  in  the 
directorate  controlling  the  ordinary  affairs  of  the  com- 
pany 

It  is  evident  that  the  plan  just  outlined  for  railways 
would  be  especially  well  adapted,  with  but  slight 
changes,  for  the  control  of  the  telegraph  lines  of  the 
country. 

We  will  next  consider  the  monopolies  discussed  in 
Chapter  III.  It  seems  too  plain  to  need  proof  that  our 
mines  and  quarries  are  certain  to  have  a  steady  increase 
in  value  as  we  use  up  the  easily  worked  surface  deposits 
and  have  to  dig  deeper  shafts  and  develop  the  poorer 
deposits  to  supply  the  demand.  In  the  case  of  any 
metals  or  minerals  of  which  the  deposits  are  so  abun- 
dant, easily  worked,  and  widely  scattered,  that  the  num- 


PLANS  FOR  THE   CONTROL    OF  MONOPOLIES.    239 

her  of  evenly  matched  competitors  is  great  enough  to 
ensure  steady  competition,  the  public  will  get  the  benefit 
of  the  especial  gift  of  Nature,  and  its  owner  can  receive 
little  more  than  an  ordinary  return  for  his  labor  and 
capital.  But,  as  we  have  already  amply  shown,  in  the 
production  of  a  great  number  of  minerals  and  metals 
competition  has  been  killed,  or  is  heavily  handicapped 
by  the  vast  advantages  of  a  few  bonanza  mines,  and  the 
public  is  being  taxed  millions  of  dollars  for  that  which 
belongs  to  it  by  right. 

How  long  is  this  condition  to  continue  ?  Must  all 
succeeding  generations  pay  for  coal,  copper,  zinc,  lead, 
nickel,  marble,  oil,  gas,  and  various  other  products  of 
our  mother-earth  just  what  those  who  control  the  chief 
deposits  choose  to  ask  ?  Because  a  pioneer  stumbles 
upon  a  valuable  mine,  shall  the  sole  right  to  use  the 
product  of  that  mine  be  secured  "  to  him,  his  heirs  and 
assigns  "  forever  ? 

Suppose,  now,  that  each  of  the  several  States  were  to 
acquire  the  title  to  all  the  productive  mines,  quarries, 
and  mineral  wealth  within  its  borders,  and  enact  laws 
providing  that  future  discoverers  of  minerals  on  land 
where  they  are  not  now  known  to  exist  should  be  liber- 
ally rewarded,  if  the  discovery  proved  valuable,  but  the 
minerals  should  belong  to  the  State  and  not  to  the  owner 
of  the  land.  The  same  principle  which  we  found  to 
apply  in  the  case  of  the  railways  would  serve  here  in 
readjusting  values,  viz.:  the  difference  in  the  rates  of 
interest  on  safe  investments  and  on  risky  ones.  When 
acquired,  the  mines  should  be  leased  to  private  parties 
for  operation.  In  the  case  of  coal-mines  and  perhaps  of 
iron,  it  would  be  well  to  copy  largely  from  the  scheme 
proposed  for  railway  operation,  viz.:  place  all  the  busi- 


240  MONOPOLIES  AND    THE  PEOPLE. 

ness  in  the  hands  of  a  single  company,  which  should 
thus  be  enabled  to  carry  on  its  business  on  the  largest 
possible  scale  ;  do  away  with  wasteful  competition,  and 
aim  to  regulate  prices  to  provide  a  certain  reasonable 
steady  income  on  its  capital  to  the  mining  company. 

For  mines  of  copper,  zinc,  lead,  and  similar  metals,  it 
would  be  best  to  pursue  a  different  plan,  and  simply  pro- 
vide by  statute  that  such  mines  should  be  leased  for  short 
terms  of  years  to  the  bidder  who  would  offer  to  sell  his 
product  at  the  lowest  price  per  ton  at  the  mines,  all 
lettings  and  relettings  to  be  publicly  advertised,  and  the 
successful  bidder  to  give  bonds  for  the  faithful  perform- 
ance of  his  contract.  It  is  difficult  to  see  how,  under 
these  conditions,  a  combination  to  defeat  competition 
could  be  formed.  Relettings  of  expired  leases  would  be 
frequent  ;  and  bidding  by  the  selling  price,  a  single  com- 
petitor would  be  sufficient  to  break  any  combination.  Of 
course  the  lease  should  specify  a  minimum  product  which 
the  mine  should  furnish. 

It  would  be  advisable,  too,  that  a  manifest  duty  of  the 
government,  which  should  be  undertaken  even  under 
present  conditions,  should  be  observed.  It  should  be 
required  to  work  the  mine  with  due  attention  to  saving 
the  greatest  possible  amount  of  ore  or  mineral  contained 
in  the  seam  or  vein. 

The  third  class  of  monopolies,  whose  legal  subjection 
to  public  control  is  acknowledged,  are  those  connected 
with  our  municipal  public  works.  There  is  already  a 
widespread  movement  toward  taking  the  control  and 
operation  of  these  out  of  the  hands  of  private  corpora- 
tions, and  placing  it  directly  with  the  city  government, 
and  progress  in  this  direction  is  very  rapid.  The  author 
believes,  however,  that  the  general  law  already  stated  is 


PLAA'S  FOR  THE   CONTROL    OF  MONOPOLIES.    24! 

applicable  here.  If  the  public  works  of  States  and  of  the 
nation  are  more  economically  and  efficiently  managed 
when  in  the  hands  of  private  parties,  it  is  surely  unwise,  as 
a  general  rule,  to  entrust  the  operation  of  municipal  works 
to  the  average  city  official.  While  it  is  in  the  highest 
degree  desirable  that  water-works,  gas,  and  electric- 
lighting  plants,  street  railways,  and  the  other  municipal 
enterprises,  discussed  in  Chapter  V.,  should  be  owned\yy 
the  municipality,  their  operation,  in  cases  where  the 
employment  of  considerable  labor  and  the  carrying  on  of 
intricate  business  and  mechanical  operations  is  involved, 
should  in  general  be  entrusted  to  private  companies.  In 
every  case  where  the  financial  condition  of  the  munici- 
pality obliges  it  to  rely  at  first  upon  private  corporations 
for  the  construction  and  ownership  of  its  public  works, 
the  franchise  should  expire  at  the  end  of  a  short  term  of 
years,  and  the  city  should  then  have  the  privilege  of  pur- 
chasing the  works  at  their  actual  cost. 

As  regards  works  for  water  supply,  there  can  be  little 
doubt  that  almost  invariably  the  municipality  should 
operate  as  well  as  own  the  works,  for  the  administration 
of  the  works  requires  but  a  small  amount  of  labor,  and 
that  of  such  a  class  that  the  city  can  safely  carry  it  on. 
But  gas  or  electric-light  plants,  both  for  street  and  resi- 
dent lighting,  should  be  operated  by  private  companies. 

These  industries  are  making  such  rapid  progress  in  the 
way  of  new  processes,  effecting  both  economy  and  im- 
provement, that  it  is  somewhat  difficult  to  say  what  steps 
should  be  taken.  Many  are  of  the  opinion  that  gas  is 
destined  to  be  entirely  replaced  by  the  electric  light  ;  but 
while  this  may  eventually  prove  true,  it  will  probably  be 
a  very  long  time  before  the  existing  gas-works  cease  to 
supply  consumers.  Thus  the  true  solution  of  the  problem 


242  MONOPOLIES  AND    THE   PEOPLE. 

seems  to  be  that  when  a  growing  town  nowadays  wishes 
to  establish  a  new  lighting  plant  of  its  own,  it  should 
adopt  electricity.  But  in  the  case  of  a  town  having  gas- 
works already  established,  the  municipality  is  safe  in 
assuming  their  ownership. 

As  regards  the  operation  of  lighting  plants  in  small 
towns,  it  would  doubtless  be  best  to  lease  the  plant  for  short 
terms  of  years  to  the  highest  bidder,  making  sure  that  the 
call  for  proposals  is  widely  circulated.  Great  cities,  how- 
ever, would  find  this  policy  unsatisfactory.  If  a  ten-year 
lease  of  the  Philadelphia  gas-works,  for  instance,  were  ad- 
vertised for  sale  to  the  highest  bidder,  there  would  be  but 
few  really  close  bidders  upon  it,  and  the  danger  of  "  a 
combination  to  defeat  competition  "  would  be  great.  It 
is  at  least  worth  considering  whether  such  a  plan  as  we 
proposed  for  railways  could  not  be  made  feasible  here. 
Let  a  corporation  be  chartered  to  operate  the  lighting 
plant  of  the  city,  and  let  the  charter  of  the  corporation 
provide  that  its  rates  shall  be  such  as  to  pay  an  annual 
dividend  upon  its  capital  stock  (fixed  by  law  and  not 
changeable)  equal  to  the  legal  rate  of  interest  in  the 
State.  Provided,  that  in  no  case  should  the  rates  be 
lowered  unless  the  net  profits  in  one  year  were  more  than 
2  per  cent,  in  excess  of  this  rate,  and  that  the  excess  for 
two  consecutive  years  was  more  than  i^  per  cent,  in  ex- 
cess of  this  rate.  Provided  also,  that  in  no  case  should  the 
rates  be  raised  unless  the  deficit  exceeded  \\  per  cent,  in 
any  year,  and  i  per  cent,  for  two  consecutive  years,  and 
that  it  should  be  proven  by  the  company  that  it  had  ex- 
ercised all  reasonable  diligence,  care,  and  economy  in  the 
management  and  operation  of  its  business. 

A  certain  proportion  of  the  stock — less  than  a  majority 
— should  be  held  by  the  city  ;  and  the  mayor  should 


PLANS  FOR  THE    CONTROL    OF  MONOPOLIES.    243 

appoint  directors  to  represent  the  city,  at  least  one  of 
whom  should  be  personally  conversant  with  the  industry 
carried  on  by  the  company. 

Although  not  often  so  considered,  the  matter  of  passen- 
ger transportation  is  a  much  more  important  matter  in 
our  greatest  cities  than  either  lighting  or  water  supply. 
The  laboring  man,  who  has  to  pay  perhaps  twelve  cents 
for  the  necessary  ride  back  and  forth  to  his  work  every 
day,  feels  this  tax  most  severely.  Suppose  that  under 
such  an  arrangement  for  street  railways  as  we  have  out- 
lined for  gas  and  electric  lighting  companies  the  fare 
would  be  reduced  to  three  cents.  His  savings  from  this 
source  would  amount  to  at  least  $18  per  year.  Counting 
the  extra  rides  and  those  which  his  wife  and  children 
have  to  take,  the  annual  saving  would  probably  reach 
$25,  a  sum  which  to  the  average  laboring  man  with  a 
family  dependent  upon  him  means  a  great  deal. 

Our  municipal  monopolies  are  now  taxing  us  that  they 
may  pay  swollen  dividends  on  millions  of  dollars  of  ficti- 
tious capital.  It  is  quite  time  that  the  public  recovered 
possession  of  the  valuable  franchises  which  are  its  right- 
ful property,  and  managed  them  for  its  own  benefit. 
The  legal  difficulties  in  regaining  the  title  to  these 
franchises  are  certainly  not  insuperable,  and  the  read- 
justment of  capitalization  can  be  made  on  the  principle 
outlined  in  the  case  of  steam  railways.  To  illustrate  : 
The  city  of  "  Polis  "  purchases  the  works  which  supply  it 
with  water  from  the  private  company  owning  them,  pay- 
ing the  average  market  value  of  the  stock  and  bonds 
during  five  years  past,  which  amounts,  perhaps,  to  one 
and  one  half  times  the  cost  of  the  works.  The  revenue 
from  the  works  has  been  sufficient,  probably,  to  pay 
8  per  cent,  on  these  securities.  The  city  issues  3  per 


244  MONOPOLIES  AND    THE  PEOPLE. 

cent,  ten-year  bonds  to  raise  funds  for  the  purchase,  and 
it  then  operates  the  works  so  as  to  gain  a  yearly  revenue 
of  6  per  cent.,  or  2  per  cent,  less  than  that  gained  by  the 
private  company.  At  the  end  of  ten  years  the  surplus 
income  from  the  works  is  enough  to  pay  more  than  one 
third  the  bonded  indebtedness  ;  and,  if  desired,  the  rest 
may  be  reissued  as  new  bonds  to  run  for  a  long  period. 

The  three  classes  of  monopolies  just  discussed — rail- 
ways, mineral  wealth,  and  municipal  works — include 
practically  all  the  monopolies  which  are  generally 
acknowledged  to  be  subject  to  the  public  control  by 
virtue  of  their  use  of  natural  agents  or  the  exercise  of 
franchises  granted  by  the  public. 

We  will  next  consider  the  monopolies  in  trade,  in 
manufacturing,  and  in  the  purchase  and  sale  of  labor,  to 
see  what  steps  should  be  taken  to  protect  them  from 
encroaching  on  the  rights  of  the  people.  In  exercising 
the  right  of  the  people  at  large  to  take  control  of  these 
purely  private  industries  from  the  hands  of  their  owners, 
we  are  assuming  a  power  which,  like  a  strong  medicine, 
may  be  as  potent  for  evil  as  for  good.  Only  extreme  neces- 
sity should  sanction  its  use,  and  its  abuse  must  be  care- 
fully guarded  against.  It  is  not  saying  too  much  to 
assert  that  the  abuse  of  this  power  has  already  become 
an  evil.  We  have  become  so  used  to  legislation  for  the 
benefit  of  special  industries,  that  legislation  for  their 
injury  does  not  seem  to  be  regarded  as  the  exercise  of  a 
dangerous  prerogative.  Thus  we  are  threatened  with  a 
flood  of  laws  to  fix  the  prices  in  various  industries  now 
subject  to  monopoly,  or  to  crush  them  out  altogether  by 
enacting  some  restrictive  measure, — legislation  which, 
by  its  directness,  is  apt  to  strike  the  average  lawmaker 
very  favorably,  but  which,  it  needs  little  wisdom  to  see, 


PLANS  FOR  THE    CONTROL    OF  MONOPOLIES.    245 

is  the  sure  forerunner  of  abuses.  The  author  trusts  that 
nothing  in  this  book  may  be  construed  as  advocating  or 
defending  some  of  the  crude  and  ill-considered  attempts 
at  anti-monopoly  legislation  already  made,  or  that  may  be 
made  in  the  future. 

We  have  proven  in  the  preceding  chapters  that,  from 
the  character  of  modern  concentrated  industry,  a  very 
large  number  of  our  manufactures  must  either  exist  as 
monopolies  or  else  must  engage  in  intense  and  wasteful 
competition.  If  the  monopoly  can  be  so  managed  that 
it  shall  carry  on  the  industry  economically,  adopt  im- 
provements, keep  up  the  character  of  its  product,  and 
keep  the  prices  therefor  so  low  as  to  make  no  more  than 
ordinary  profits,  it  would  be  for  the  public  advantage 
that  monopolies  rather  than  competition  should  exist. 
Can  we  regulate  monopolies  to  secure  such  results  ?  If 
so,  our  problem  will  be  solved. 

The  author  has  proposed  for  the  first  class  of  monopo- 
lies— those  obtaining  the  benefit  of  natural  agents  and 
public  franchises — government  ownership  of  fixed  capi- 
tal and  regulation  of  prices,  with  private  operation  and 
general  management.  But  he  is  far  from  believing  that 
such  a  plan  would  now  be  wise  for  regulating  trusts.  It 
may  indeed  be  that,  at  some  time  in  the  future,  many  of 
the  great  staple  manufactures  will  be  formally  estab- 
lished by  the  government  as  monopolies,  and  controlled 
in  a  similar  way  to  that  which  we  have  outlined  for  the 
railway  system  ;  but  it  is  so  far  in  the  future  that  we 
need  not  consider  it  in  detail  now.  Under  our  present 
political  organization  it  would  be  practically  impossible 
for  the  government  to  undertake  to  regulate  justly  and 
equitably  such  an  industry,  for  instance,  as  the  steel-rail 
manufacture.  We  have  set  our  State,  national,  and 


246  MONOPOLIES  AND    THE  PEOPLE. 

municipal  governments  a  hard  enough  task  in  the  pre- 
ceding pages  of  this  chapter,  in  bringing  under  public 
control  our  monopolies  of  transportation  and  communi- 
cation and  our  productive  mines  ;  and  although  it  is 
a  work  possible  of  accomplishment,  it  will  need  good 
statesmanship  to  carry  it  out.  By  the  time  that  task  is 
accomplished,  a  similar  plan,  improved  as  experience  will 
then  suggest,  may  perhaps  be  found  available  for  the 
regulation  of  the  important  manufacturing  industries. 

We  decide,  then,  that  it  is  for  the  public  advantage  at 
.present  that  both  the  owership  and  operation  of  manu- 
facturing industries  and  of  trade  must  remain  in  private 
hands.  The  next  question  is,  will  the  greatest  advantage 
to  the  public  be  secured  by  starting  a  crusade  to  re- 
establish competition  and  break  up  all  existing  monopo- 
lies in  manufacturing  and  trade  ;  or  by  taking  the 
opposite  course,  legalizing  monopolies  and  so  regulating 
them  by  law  that  they  shall  be  prevented  from  making 
undue  profits  by  laying  an  exorbitant  tax  upon  the 
public  ? 

Practically  all  the  efforts  made  or  proposed  thus  far 
for  remedying  the  evils  of  monopolies  in  manufacturing 
and  trade  have  had  for  their  purpose  the  re-establish- 
ment of  competition.  The  investigation  to  which  the 
first  part  of  this  book  was  devoted  shows  the  wide  extent 
of  the  movement  to  restrict  competition.  Is  it  possible 
to  wholly  counteract  this  ?  All  our  study  of  the  laws  of 
competition  seems  to  show  that  the  tendency  of  modern 
competition  is  to  destroy  itself  by  its  own  intensity.  Cer- 
tainly all  the  strenuous  efforts  to  keep  it  alive  by  the 
force  of  legal  enactment  and  public  opinion  have  thus 
far  proved  unavailing.  There  are  now,  probably,  at  least 
a  million  persons  in  the  United  States  who  are  directly  or 


PLANS  FOR  THE    CONTROL    OF  MONOPOLIES.    247 

indirectly  interested  in  unlawful  contracts  in  restraint  of 
competition  ;  and  among  them  are  included  many  of  the 
best  financiers  and  most  enterprising  business  men  of  the 
country.  Certainly  those  who  propose  to  drive  these  men 
into  a  renewal  of  competitive  strife  contrary  to  their  will 
have  set  themselves  a  very  difficult  task. 

Let  us  consider  the  opposite  alternative.  It  cannot  be 
a  good  thing  to  have  such  a  great  proportion  of  the  active 
business  men  of  the  country,  who  bear  the  highest  per- 
sonal character,  engaged  in  illegal  contracts.  Let  us 
therefore  take  them  within  the  pale  of  the  law.  They 
seem  to  be  determined  to  make  contracts  with  each  other 
in  restraint  of  competition  ;  and  believe,  indeed,  that  they 
are  forced  to  do  it  by  modern  conditions  of  trade.  Sup- 
pose we  were  to  legalize  these  contracts  and  permit  the 
establishment  of  monopolies.  What  can  we  then  do  to 
protect  the  public  from  extortion  in  prices  and  adultera- 
tion in  its  products  on  the  part  of  the  monopoly  ? 

In  the  first  place,  now  that  we  have  legalized  monopo- 
lies there  is  no  more  excuse  for  secrecy.  To  work  in 
darkness  and  privacy  befits  law-breakers,  but  is  needless 
for  legitimate  enterprises.  Let  the  law  provide  that  every 
contract  for  the  restriction  of  competition  shall  be  in 
writing,  and  that  a  copy  shall  be  filed,  as  a  deed  for  real 
estate  is  filed  now,  with  the  proper  city  or  town  officer 
where  the  property  affected  is  situate,  and  also  with  the 
Secretary  of  State  where  the  contract  is  made.  Certainly 
no  honest  man  will  object  to  this  provision.  The  con- 
tention has  been  made  that  contracts  to  restrict  competi- 
tion were  necessarily  kept  secret  because  they  were 
"without  the  pale  of  the  law."  Very  well;  we  have 
legalized  them.  There  can  be  no  further  defense  of 
secrecy.  If  any  now  refuse  to  make  public  their  con- 


248  MONOPOLIES  AND    THE  PEOPLE. 

tracts  to  restrict  competition,  the  refusal  is  evidence  that 
the  contract  is  for  the  injury  of  the  public  or  some  com- 
petitor and  therefore  properly  punishable.  We  shall  now 
know  just  what  monopolies  exist  ;  just  what  is  their 
strength,  and  for  just  how  long  a  time  their  members  are 
bound.  Let  us  next  see  what  measures  we  can  adopt  to 
prevent  these  legalized  monopolies  from  practising  extor- 
tion upon  the  public  and  abusing  the  power  they  have 
gained  by  the  combination. 

The  first  important  means  to  secure  this  which  the 
author  would  suggest  is  simply  an  extension  of  the  com- 
mon-law principle  of  non-discrimination.  A  man  in 
conducting  certain  sorts  of  business  is  permitted  to  do 
as  he  chooses.  He  may  sell  to  one  person  and  refuse  to 
sell  to  another  ;  he  may  give  to  one  and  withhold  from 
another.  But  if  he  enters  business  as  the  keeper  of  an 
inn  or  as  a  common  carrier  of  passengers  or  freight,  he 
can  no  longer  exercise  partiality.  He  has  elected  to  be- 
come a  necessary  servant  of  the  public,  and  as  such  he  is 
bound  to  serve  impartially  all  who  apply.  In  the  same 
way  a  manufacturer  while  he  engages  in  business  un- 
der the  usual  laws  of  competition,  may  sell  to  whom  he 
pleases  and  exercise  such  preference  as  he  chooses.  But 
when  he  combines  with  all  other  manufacturers  of  the 
same  sort  in  a  combination  to  restrict  competition,  he 
and  his  allies  voluntarily  change  their  relation  to  the 
public.  Is  it  not  true  that  they  do  actually  elect  to  become 
necessary  servants  of  the  public — far  more  necessary,  in- 
deed, than  the  inn-keeper  or  the  stage-coach  driver, — and 
ought  they  not  therefore  to  be  placed  under  similar  legal 
restrictions  ? 

In  every  case  where  combination  or  consolidation  re- 
stricts competition  in  an  industry,  one  effect  produced  is 


PLANS  FOR  THE   CONTROL    OF  MONOPOLIES.    249 

an  increase  in  the  power  over  the  public  which  the  indus- 
try possesses.  But  this  increased  power  over  the  public, 
thus  voluntarily  assumed,  must  inevitably  carry  with  it 
increased  responsibility  to  the  public.  It  is  the  duty 
of  the  government  to  see  that  this  responsibility  is 
legally  enforced. 

This  first  principle,  then,  should  be  embodied  in  a  law 
providing,  in  substance,  that  every  person  or  firm  enter- 
ing into  a  contract  to  restrict  competition  should,  so  long 
as  that  contract  was  in  force,  be  debarred  from  showing 
any  preference  in  his  or  its  purchases  and  sales,  by  giv- 
ing more  or  less  favorable  prices  to  any  person  or  firm 
than  those  quoted  to  any  other  person  or  firm.  To 
enforce  this  requirement  and  prevent  its  evasion  it  is 
necessary  to  provide  also  that  prices  shall  be  public  and 
that  they  shall  not  be  altered  without  due  notice.  The 
requirement  of  publicity  might  be  best  effected  by  provid- 
ing that  the  contract  restricting  competition  should  con- 
tain a  schedule  of  prices,  which  would  usually  be  the 
case  in  any  event. 

While  this  may  seem  like  quite  an  assumption  of  au- 
thority on  the  part  of  the  State,  it  is  exactly  what  trusts 
and  trade  associations  are  striving  to  effect,  though  with 
the  important  qualification  that  when  occasion,  in  the 
shape  of  an  obnoxious  competitor,  requires,  they  wish  to 
be  at  liberty  to  put  prices  up  or  down  at  short  notice 
and  exercise  their  preferences  as  they  choose. 

Let  us  now  see  what  we  would  effect  by  the  enforce- 
ment of  this  principle  of  non-discrimination.  We  have 
explained  in  the  chapter  on  combinations  in  trade  how 
one  monopoly  gains  strength  by  alliance  with  another  ; 
as  when  the  firms  belonging  to  the  car-spring  combina- 
tion made  a  contract  with  the  steel  combination  by 


250  MONOPOLIES  AND    THE  PEOPLE. 

which  that  monopoly  agreed  to  sell  to  them  at  a  re- 
duced price  and  to  make  an  extra  rate  to  their  competi- 
tors. Under  this  law  it  would  be  impossible  to  found  one 
monopoly  upon  the  favors  of  another  in  this  manner. 

The  obnoxious  trade  boycott,  too,  which  is  now  be- 
coming so  common,  would  be  effectually  checked.  And 
the  scheme  for  crushing  out  a  rival  by  giving  all  his 
customers  specially  favorable  rates  would  no  longer  be 
practicable.  The  fact  is  that  if  we  can  stop  the  dis- 
criminations which  the  monopolies  have  practised,  we 
shall  cure  a  large  share  of  the  evils  they  have  caused. 
It  may  be  said  that  the  courts  will  already  punish  many 
conspiracies  of  this  sort  ;  but  a  monopoly  which  is  al- 
ready breaking  the  law  by  its  contracts  of  combination, 
finds  in  its  methods  of  doing  business  plenty  of  chances 
to  evade  the  laws  against  conspiracy.  Certainly  with 
a  properly  drawn  law  with  reference  to  the  publicity 
and  stability  of  prices,  it  should  be  possible  to  practi- 
cally wipe  out  the  evil  of  discrimination  by  monopolies. 
It  is  also  to  be  noted  that  the  requirement  of  non-dis- 
crimination and  of  public  and  stable  prices  would  bring 
profit  in  doing  away  with  the  waste  of  competition. 

We  have  now  to  inquire  what  means  it  is  possible  to 
take  to  ensure  that  the  prices  charged  by  the  monopoly 
shall  not  only  be  the  same  to  all,  but  that  they  shall  not 
in  themselves  be  so  exorbitant  that  the  monopoly  will 
reap  large  profits  at  the  public  expense.  How  can  we 
keep  the  prices  charged  by  the  monopoly  from  rising 
far  above  the  point  where  they  would  stand  if  free  com- 
petition were  in  force  ?  Two  methods  are  open  to  us. 
We  may  keep  down  the  monopoly's  rates  by  what  we 
will  call  potential  competition,  or  we  may  reduce  them 
directly  by  legislative  enactment. 


PLANS  FOR  THE   CONTROL    OF  MONOPOLIES.    2$  I 

The  right  of  the  public  to  take  this  latter  course  may 
be  defended  on  the  ground  that  the  monopoly  has  vol- 
untarily made  itself  a  necessary  public  servant,  and  in 
that  capacity  offers  to  the  public  its  goods.  While  it  is 
true  that  the  people  permit  the  monopoly  to  become  a 
necessary  public  servant  and  protect  it  in  the  contracts 
by  which  it  restricts  competition,  it  is  also  true  that  the 
monopoly  cannot  justly  make  merchandise  of  the  neces- 
sities of  the  people.  The  public  may  allow  a  combina- 
tion to  obtain  control  of  all  the  sugar  refineries,  for  in- 
stance, and  protect  the  combination  in  its  formation. 
But  suppose  the  owners  of  the  combination  then  say  : 
"  The  people  are  obliged  to  have  sugar  and  we  control 
the  supply.  We  will  set  a  high  price  on  sugar,  there- 
fore, because  we  know  that  they  will  pay  it  rather  than 
go  without."  They  are  then  making  the  necessity  of  the 
public  a  source  of  gain,  and  it  cannot  be  believed  that 
this  will  be  permanently  suffered. 

The  serious  difficulty  in  fixing  by  direct  government 
action  the  prices  which  a  monopoly  of  this  sort  shall 
charge,  is  that  we  cannot  stop  at  that  point.  When  once 
the  government  steps  in  to  do  so  radical  a  thing  as  to  fix 
the  price  which  a  monopoly  shall  charge,  it  becomes  in 
equity  responsible  to  the  owners  of  that  monopoly  for 
the  maintenance  of  their  incomes  from  their  capital  in- 
vested. If  their  profits  have  been  so  reduced  by  this 
action  as  to  seriously  injure  the  value  of  their  property, 
they  have  a  legal  right  to  claim  compensation  from  the 
state  for  the  injury  it  has  done  them.  And  in  almost 
every  case  they  would  set  up  the  claim  that  their  prop- 
erty had  been  thus  injured.  To  determine  the  point  at 
which  reasonable  prices  and  reasonable  profits  become 
extortionate  prices  and  unjust  profits  is  a  task  requiring 


252  MONOPOLIES  AND    THE  PEOPLE. 

expert  knowledge  and  the  most  comprehensive  judg- 
ment, aided  by  the  most  accurate  statistics.  To  impose 
this  task  on  our  already  overburdened  courts  would 
permanently  block  the  wheels  of  justice,  and  would  give 
to  the  judicial  department  of  government  a  work  which 
its  machinery  is  wholly  unsuited  to  carry  on. 

It  seems  evident,  therefore,  that  when  it  becomes 
necessary  for  the  state  to  directly  fix  prices  to  be 
charged  by  monopolies,  a  more  radical  step  should  be 
taken.  The  monopoly  should  be  established  on  a  per- 
manent basis,  and  the  state  should  have  some  part  in 
its  direct  control. 

Discarding,  therefore,  direct  action  by  the  state  to  fix 
prices  as  inexpedient,  for  the  present,  at  least,  let  us  see 
what  we  can  effect  by  means  of  "  potential  "  competition, 
which  term  we  will  use  to  signify  that  competition  which 
may  be  established  in  any  monopolized  industry  if  the 
inducements  offered  are  sufficiently  great.  It  must  be 
remembered  that  nowadays  men  of  capital  and  enterprise 
are  always  on  the  look-out  for  every  opportunity  to  invest 
money  and  expend  their  industry  where  it  will  bring  the 
greatest  returns.  If  any  monopoly  seems  to  be  making 
large  returns,  people  are  generally  ready  to  believe  that 
it  is  making  twice  as  great  profits  as  it  really  is  ;  and 
some  one  is  quite  likely  to  start  in  as  a  competitor,  if 
there  is  a  prospect  of  large  profits.  Now  we  wish  to  do 
two  things.  We  wish  to  make  it  so  easy  for  new  com- 
petitors to  enter  the  field  against  a  monopoly  that  its 
managers  will  keep  their  profits  down  in  order  not  to  call 
in  any  new  competitors.  We  also  wish  to  so  modify  the 
intensity  of  competition  between  the  monopoly  and  the 
new  competitor  that  the  latter  may  have  a  chance  at 
least  of  being  repaid  for  its  expenditure  in  entering  the 


/Y..-/.VS  FOR  THE   CONTROL   OF  MONOPOLIES.    253 

field.  The  simplest  and  be.st  of  the  legal  provisions 
which  we  may  enforce  to  this  end  is  the  one  already 
stated  of  non-discrimination.  The  monopoly  can  no 
longer  reduce  its  price  to  apply  to  only  the  limited  field 
in  which  the  new  competitor  works,  but  must  reduce  its 
prices  everywhere  to  meet  those  made  by  the  rival.  In 
the  case  of  monopolies  in  trade  and  all  monopolies  in 
manufacturing  in  which  the  fixed  capital  required  is  but 
small,  this  is  all  that  would  be  needed  to  encourage  the 
establishment  of  new  competitors  and  discourage  the 
monopoly  from  grasping  after  undue  profits  from  the 
public. 

In  the  case  of  those  manufacturing  monopolies  in 
which  a  large  fixed  capital  must  be  invested  at  the  start 
by  any  new  competitor,  we  have  a  much  more  difficult 
problem.  It  is  true  that  in  this  case  the  monopoly  itself 
has  more  at  stake  ;  and  this  may  induce  the  starting  up 
of  new  competitors  simply  to  be  bought  out  by  the  trust, — 
a  sort  of  blackmailing  operation  which  is  certainly  repug- 
nant in  its  character.  It  might  be  possible  to  provide 
that  rates  charged  by  the  monopoly  must  be  so  stable 
that  a  competitor  would  have  a  chance  to  establish  itself 
before  the  monopoly  could  bring  its  own  rates  down.  It 
might  be  possible  to  force  the  monopoly  to  keep  all  its 
factories  in  operation,  and  thus  oblige  it  to  keep  down  its 
price  in  order  to  dispose  of  its  products  ;  but  there  are 
evident  practical  difficulties  in  the  way  of  enforcing  such 
laws.  It  seems  a  great  pity  that  just  now,  when  to  find 
some  employment  of  prison  convicts  in  some  manner 
that  will  not  "  compete  with  free  labor,"  and  thus  dis- 
please the  labor  interests,  seems  an  impossibility,  we 
cannot  set  the  convicts  at  work  to  compete  with  the 
trusts  and  bring  down  their  profits  to  a  reasonable  point. 


254  MONOPOLIES  AND    THE  PEOPLE. 

Surely  the  labor  party  would  find  no  fault  with  this  use 
of  convict  competition. 

There  is  one  step,  however,  which  we  can  take,  and 
whose  effect  would  certainly  be  very  great  ;  in  its  desira- 
bility, apart  from  questions  of  monopoly,  all  honest  men 
are  practically  united.  We  can  reform  our  laws  regard- 
ing corporate  management.  It  is  a  mild  arraignment 
compared  to  what  is  deserved,  to  say  that  our  present 
laws  regarding  the  formation  and  management  of  corpo- 
rations, taking  the  country  as  a  whole,  are  a  shame  to 
the  people  and  a  disgrace  to  the  men  who  made  them. 
They  seem  designed  to  place  a  premium  on  fraud  and 
knavery,  and  to  assist  the  professional  projector  and 
stock  manipulator  in  reaping  gains  from  innocent — gen- 
erally very  innocent — stockholders.  Now  a  real  reform 
in  our  corporation  laws  would  greatly  simplify  our  work 
in  controlling  monopolies.  Let  us  have  no  more  stock- 
watering  of  any  sort  at  any  time  in  a  corporation's  life. 
Let  us  have  no  more  "  income  bonds  "  which  yield  no 
income,  and  "  preferred  stock  "  in  which  another  is  pre- 
ferred after  all.  Two  classes  of  securities  are  enough 
for  an  honest  corporation,  and  the  public  interest  re- 
quires the  charter  of  no  other  class  of  companies.  Let 
us  have  done,  too,  with  the  iniquitous  custom  of  one 
corporation  holding  another's  stock  or  bonds.  With  a 
few  such  simple  reforms  as  these  effected,  the  holders  of 
stock  in  our  corporations  would  have  some  idea  where 
they  stand  and  what  their  securities  represent,  and 
would  take  some  interest  in  the  control  of  their  property. 

With  these  reforms,  in  the  case  of  every  corporation 
making  a  contract  to  restrict  competition,  it  would  be 
required  that  the  company  make  public  annually  a  full 
statement  of  its  receipts,  expenditures,  and  profits. 


PLANS  FOR  THE   CONTROL   OF  MONOPOLIES.    255 

Every  monopoly  would  stand  before  the  public  then  in 
its  true  position,  and  every  one  would  know  if  it  were 
making  50  per  cent,  per  annum  on  the  actual  capital  in- 
vested, or  only  5  per  cent.  With  these  facts  made  public, 
if  any  monopoly  ventured  to  raise  its  price  till  it  reaped 
unusual  profits,  some  of  the  heaviest  consumers  of  the 
monopolized  product  would  be  very  apt  to  start  a  fac- 
tory of  their  own  in  opposition.  It  is  to  be  remembered 
that  under  the  law  of  non-discrimination  the  monopolies 
would  be  prevented  from  currying  favor  with  the  large 
consumers  by  giving  them  specially  favorable  prices.  It 
is  now  common  to  do  this,  as  it  removes  the  danger  of 
combination  among  these  important  customers  to  com- 
pete with  the  monopoly. 

To  sum  up,  the  chief  features  of  the  plan  proposed 
for  the  control  of  monopolies  in  manufacture  and  trade 
are  as  follows  :  Make  contracts  to  restrict  competition, 
legal  and  binding,  instead  of  illegal  and  void  as  now.  But ; 
provide  that  every  such  contract  shall  be  filed  for  public 
inspection  ;  that  prices  charged  by  the  combination  shall 
be  public,  stable,  and  absolutely  unvarying  to  all ;  that 
the  affairs  of  the  combination  shall  be  managed  accord- 
ing to  a  consistent  and  stringent  corporation  law  ;  and 
that  an  annual  report  of  the  operations  of  the  combina- 
tion be  made  to  a  public  commission. 

Contrast  this  with  the  existing  law  upon  this  important 
subject.  In  Judge  Barrett's  decision  in  the  Sugar  Trust 
case  he  said  : 

"  The  development  of  judicial  thought,  in  regard  to  contracts  in 
restraint  of  trade,  has  been  especially  marked.  The  ancient  doc- 
trine upon  that  head  has  been  weakened  and  modified  to  such  a  de- 
gree that  but  little  if  any  of  it  is  left.  Indeed,  excessive  competition 
may  sometimes  result  in  actual  injury  to  the  public  ;  and  anti-corn- 


256  MONOPOLIES  AND    THE  PEOPLE. 

petitive  contracts,  to  avert  personal  ruin,  may  be  perfectly  reason- 
able. It  is  only  when  such  contracts  are  publicly  oppressive  that 
they  become  unreasonable,  and  are  condemned  as  against  public 
policy." 

This  is  probably  the  best  statement  of  the  present 
status  of  the  common  law  upon  this  subject  now  extant. 
But  what  a  path  to  endless  litigation  does  it  open  !  Who 
shall  draw  the  line  where  a  contract  to  restrain  competi- 
tion ceases  to  be  beneficial  and  lawful,  and  becomes  an 
injury  to  the  public  welfare  ?  Must  this  be  left  to  judge 
and  jury?  If  so,  the  responsibilities  of  our  already 
overburdened  Courts  are  vastly  increased. 

In  contrast  with  such  a  policy  as  this,  the  plan  before 
presented  certainly  promises  definiteness  in  the  place  of 
uncertainty  ;  and  treats  all  contracts  in  restraint  of  com- 
petition with  impartiality.  It  is  believed  that  the  effect 
of  its  enforcement  would  be  a  great  reduction  in  the  tax 
now  levied  on  us  by  monopolies. 

There  is  yet  one  way,  however,  in  which  all  these 
monopolies  that  we  have  found  it  so  difficult  to  devise 
a  plan  to  deal  with — the  manufacturers'  trusts — may  be 
quickly  and  certainly  reduced.  Our  heavy  tariff  on 
imported  goods,  by  protecting  manufacturers  from  foreign 
competition,  and  thus  reducing  the  number  of  possible 
competitors,  has  undeniably  been  a  chief  reason  why 
trusts  have  appeared  and  grown  wealthy  in  this  country 
before  any  other.  The  author  has  purposely  refrained, 
as  far  as  possible,  from  reference  to  the  relation  of  the 
tariff  to  monopolies  ;  for  the  question  has  been  so  hotly 
fought  over,  and  the  real  facts  concerning  it  have  been 
so  garbled  and  distorted,  that  people  are  not  yet  ready 
to  consider  it  in  an  unprejudiced  way.  This  much, 
however,  no  one  can  gainsay.  We  hold  in  our  hands 


PLANS  FOR  THE   CONTROL    OF  MONOPOLIES. 


the  means  to  at  any  time  reduce  the  prices  and  profits 
of  practically  all  our  monopolies  in  manufacturing  to  a 
reasonable  basis,  by  simply  cutting  down  the  duty  on 
the  products  of  foreign  manufactories.  Now,  if  after 
our  plan  just  described  is  in  force,  the  managers  of  any 
monopoly  choose  to  be  so  reckless  as  to  raise  its  prices 
to  a  point  where  its  published  reports  will  show  it  to  be 
making  enormous  profits,  thus  tempting  new  competi- 
tors to  enter  the  field  and  breeding  public  hostility,  all 
honest  protectionists  and  free-traders  will  be  quite  apt 
to  unite  in  a  demand  that  the  "protection  "  under  which 
this  monopoly  is  permitted  to  tax  the  public  be  taken  away. 

If  only  we  could  find  in  any  possible  plan  so  excellent 
a  solution  of  the  problem  of  labor  monopolies  as  a  re- 
duction of  the  tariff  offers  us  in  the  case  of  trusts  ! 
The  question  is  so  complex  a  one  that  it  is  hardly  pos- 
sible to  consider  it  here,  except  very  briefly.  Certainly, 
if  we  legalize  combinations  to  restrict  competition  among 
capitalists,  we  should  among  laborers  as  well.  Indeed, 
the  decay  of  the  old  common-law  principle,  that  such 
contracts  were  against  public  policy,  and  that  such  com- 
binations were  punishable,  has  been  more  marked  in 
the  case  of  trade  unions  than  anywhere  else.  Besides 
this,  as  long  as  employers  have  the  right  to  kill  compe- 
tition in  the  purchase  of  labor,  workmen  should  cer- 
tainly have  the  right  to  avoid  competition  in  its  sale. 
But  to  prevent  by  force  other  competitors  from  taking 
the  field,  if  they  choose,  against  any  labor  combination, 
is  an  infringement  of  the  personal  liberty  guaranteed 
to  every  man  by  the  Constitution,  and  can  by  no  means 
be  lawfully  permitted. 

If  workingmen  only  understood  how  much  the  ap- 
parent gain  when  they  win  in  a  strike  is  overbalanced 


258  MONOPOLIES  AND    THE  PEOPLE. 

by  their  loss  in  the  higher  prices  which  they  have  to  pay 
for  the  necessaries  of  life,  and  in  the  reduced  demand  for 
labor,  they  would  be  as  anxious  to  protect  capital  as  they 
now  are — some  of  them — to  injure  it.  The  strikes  make 
timid  the  men  who  have  capital  to  invest.  They  will  not 
loan  their  money  to  business  men,  builders,  manufac- 
turers, or  any  one  who  wishes  to  use  it  to  employ  work- 
men, except  at  a  higher  rate  of  interest,  to  pay  for  the 
increased  risk.  Hence,  the  cost  of  the  capital  used  in 
production  is  greater,  and  the  price  the  public  has  to  pay 
for  the  product  must  be  greater. 

Again,  when  men  have  to  pay  higher  rates  of  interest 
for  the  money  they  borrow  they  are  slower  to  engage  in 
new  enterprises.  Mr.  A.  a  builder,  intended  to  put  up  a 
block  of  a  dozen  houses  this  season,  which  would  have 
tended  to  reduce  rents  ;  but  the  fear  of  strikes,  with  their 
attendant  damage  and  loss,  has  prevented  him  from  bor- 
rowing money  at  less  than  8  per  cent,  interest.  He 
concludes  that,  on  the  whole,  this  will  eat  up  so  much  of 
his  profits  that  he  will  not  build.  Is  it  not  too  plain  to 
need  proof  that  the  moral  influence  alone  of  the  strikes 
has  robbed  the  workmen  at  every  point  ?  And  this  is 
one  of  a  thousand  cases  in  a  hundred  different  industries. 

The  plans  we  have  discussed  for  the  treatment  of 
monopolies  have  for  their  object  a  benefit  to  the  people 
at  large,  by  enabling  them  to  purchase  the  products  of 
industry  and  of  natural  wealth  free  from  the  tax  now 
levied  upon  them  by  monopolies.  If  we  can  effect  this, 
we  shall  not  have  a  millennium  ;  there  will  still  be  injustice 
and  suffering  enough  in  the  world  ;  but  we  shall  have 
reduced  the  pressure  upon  the  men  who  work  with  their 
hands  for  their  daily  bread,  enough  so  that  we  shall  no 
longer  see  the  strange  spectacle  of  over-production  and 


PLANS  FOR  THE   CONTROL   OF  MONOPOLIES.    259 

hunger  and  nakedness  existing  side  by  side.  Men's  de- 
sires were  made  by  an  All-wise  Creator  to  be  always  in 
advance  of  their  ability  to  gratify  them.  And  the  com- 
mercial supply  of  that  ability — the  supply  of  men  willing 
to  work — ought  always  to  be  behind  the  demand  for 
men. 

It  seems  beyond  dispute,  then,  that  whatever  will  re- 
move these  obstructions  to  the  wheels  of  production  will 
increase  the  demand  for  labor,  as  well  as  increase  the 
wages  of  labor  by  lowering  the  prices  of  the  necessaries 
of  life.  This  the  plan  we  have  discussed  promises  to  do, 
and  it  also  promises  to  benefit  the  whole  people  by  low- 
ering the  cost  of  monopolized  articles. 

The  men  and  women  who  work  with  their  hands,  and 
those  dependent  on  them,  form  97  per  cent,  of  the  popu- 
lation of  the  country.  Instead  of  combining  to  stop 
production  in  this  shop  or  that  factory,  why  not  join 
hands  to  work  for  reforms  in  the  interest  of  the  whole 
people  ?  Be  sure  that  in  so  doing,  organized  labor  will 
have  the  hearty  co-operation,  and  leadership  if  need  be, 
of  the  best  men  in  every  class  of  society. 

But  while  the  reforms  proposed  promise  great  and  im- 
portant benefits  to  the  workers  on  whom  the  tax  laid  by 
monopoly  falls  most  cruelly,  the  question,  "  What  shall 
fix  the  rate  of  wages,  if  competition  cannot  ? "  is  still  left 
undecided.  The  best  answer  the  author  can  make  to  this 
is  as  follows  :  The  monopoly  formed  by  the  trade  unions 
in  the  sale  of  labor  is  unnatural,  because  the  number  of 
competing  units  is  great  instead  of  small.  As  new  com- 
petitors must  continually  arise,  the  monopoly  can  never 
be  successful  without  the  use  of  unlawful  means.  If  it 
raises  the  price  of  labor  above  what  free  competition 
would  determine,  it  as  truly  lays  a  tax  on  the  whole  peo- 


260  MONOPOLIES  AND    THE   PEOPLE. 

pie  as  did  the  copper  monopoly.  On  the  other  hand,  we 
must  recognize  the  fact  that  competition  is  now  often 
absent  in  the  purchase  of  labor,  and  this  is  a  chief  and 
sufficient  cause  for  the  existing  attempts  to  kill  competi- 
tion in  its  sale.  But  this  is  largely  due  to  the  fact  that 
the  supply  of  labor  is  now  in  excess  of  the  demand. 
When  instead  of  signs  everywhere,  "  No  one  need  apply 
for  employment  here,"  we  see  placards,  "  Men  wanted  ; 
high  prices  to  good  workmen,"  then  competition  will 
assert  itself  in  the  purchase  of  labor. 

In  regard  to  the  first  class  of  industries,  those  utilizing 
natural  agents,  which  we  proposed  to  place  under  the 
care  of  the  state,  it  is  evident  that  we  can  permit  no 
strikes  there.  Our  transportation  lines,  our  mines,  our 
gas-works,  our  water  supplies,  are  to  be  operated  for  the 
benefit  of  the  whole  people,  and  no  labor  monopoly  can 
be  permitted  to  stop  them.  The  plan  that  might  be 
adopted  to  prevent  interruptions  in  these  industries  has 
been  already  referred  to.  The  author  would  suggest  a 
similar  plan  for  the  benefit  of  labor  in  general.  Suppose 
that  in  the  charter  of  a  manufacturing  corporation,  a 
certain  portion  of  the  stock  in  small- sized  shares  was  set 
aside  for  the  employes  required  to  operate  the  mill.  Let 
each  employ^  be  required  to  hold  a  certain  number  of 
shares  in  proportion  to  his  wages  ;  to  purchase  them 
when  he  begins  to  work,  and  to  return  them  when  he 
leaves  the  service  of  the  corporation  ;  the  price  in  all 
cases  to  be  par.  In  case  he  leaves  without  giving  a 
certain  notice,  he  should  forfeit  a  certain  proportion  of 
his  stock.  If,  on  the  other  hand,  he  is  discharged  with- 
out an  equal  notice,  he  should  receive  the  full  amount  of 
his  stock,  and  a  sum  in  addition  equal  to  the  penalty 
which  he  would  have  incurred  had  he  broken  the  con- 


PLANS  FOR  THE   CONTROL    OF  MONOPOLIES.     26 1 

tract.  Who  will  deny  that  such  a  move  would  be  vastly 
to  the  interest  of  both  parties,  the  employer  and  em- 
ployed. Is  not  a  protection  needed  by  the  workman 
against  the  power  of  the  employer  to  turn  him  adrift  at 
any  time  without  a  penny  ? 

Finally  it  must  be  said  that  the  labor  question,  more 
than  any  other  connected  with  monopoly,  needs  solution 
through  the  influence  of  the  principles  of  Christian  fra- 
ternity. In  the  last  analysis,  every  man  sells  to  his 
brother  men  his  service  and  receives  his  food,  clothing, 
and  shelter  in  return.  We  may  execute  justice  never  so 
well,  and  regulate  never  so  nicely  the  wages  of  men  by 
the  law  of  supply  and  demand,  there  will  still  be  special 
cases  demanding  and  deserving  to  be  treated  by  the  rules 
of  brotherly  charity.  The  strong  were  given  their 
power  that  they  might  aid  the  feeble  ;  and  they  who  fall 
behind  in  the  struggle  for  position  are  not  to  be  blotted 
out  by  the  brute  law  of  the  survival  of  the  fittest,  but 
cared  for  as  the  noblest  instincts  of  humanity  prompt. 

I  am  well  aware  that  the  indictment  which  conserva- 
tive critics  will  be  apt  to  bring  against  the  plans  for  the 
equitable  control  of  monopolies  presented  in  this  chap- 
ter is  that  they  are  too  novel,  and  that  they  require  too 
much  of  an  upheaval  of  existing  institutions  for  their 
accomplishment.  The  conservative  man  is  invariably  in 
favor  of  getting  along  with  things  as  they  are.  The  an- 
swer to  be  made  to  this  is,  that  no  candid  man  who 
will  make  a  thorough  study  of  the  present  status  of 
monopoly  and  of  the  attempts  to  control  it  can  be  con- 
servative. The  present  status  of  monopolies  is  just 
neither  to  their  owners  nor  to  the  public.  They  are 
plundering  the  public  as  much  or  as  little  as  they 


262  MONOPOLIES  AND    THE  PEOPLE. 

choose  ;  and  the  sovereign  people  are  submitting  to  it 
and  taking  their  revenge  by  passing  retaliatory  laws  in- 
tended to  ruin  the  monopolies  if  possible.  These  legis- 
lative "  strikes  "  are  thus  especially  well  calculated  to 
foster  extortion  on  the  part  of  the  owners  of  monopolies, 
who  naturally  wish  to  make  what  profits  they  can  before 
some  piece  of  legislation  is  put  through  to  destroy  the 
industry  they  have  built  up. 

In  contrast  to  this  are  the  plans  proposed  in  this  chap- 
ter. They  offer  to  establish  a  definite  relation  between 
the  public  and  the  monopolies,  and  a  permanent  and 
stable  foundation  for  each  industry  they  affect  in  place 
of  the  present  fickle  and  ever  changing  one. 

There  is  another  class  of  critics  who  may  complain 
that  the  plan  proposed  leaves  too  much  power  still  in 
the  hands  of  the  monopolists,  and  gives  the  government 
too  small  a  part  in  their  management.  The  answer  to 
this  is  very  evident.  We  have  found  the  cardinal  value 
of  the  system  of  individual  competition  to  be  that  it 
tends  by  a  process  of  natural  selection  to  bring  the  men 
of  greatest  ability  into  the  control  and  management  of 
our  industries  ;  while  the  vital  weakness  in  the  manage- 
ment of  industry  by  government  is  the  fact  that  the  sov- 
ereign people  does  not  choose  the  wisest  and  most  hon- 
est men  to  control  its  affairs.  Men  may  well  say  that  if 
they  are  to  be  robbed  it  had  better  be  by  a  corporation, 
where  innocent  stockholders  will  receive  part  of  the  ben- 
efit, than  by  dishonest  officials  of  government. 

The  ultimate  remedy  for  the  evils  of  monopoly,  there- 
fore, lies  with  the  people.  When  they  will  choose  to 
control  their  affairs  the  men  of  greatest  wisdom  and 
honor ;  when  each  man  will  exercise  the  same  care  in 
choosing  men  to  care  for  the  public  business  that  he 


PLANS  FOR  THE   CONTROL    OF  MONOPOLIES.    263 

does  in  caring  for  his  own  private  interests,  then  we  can 
safely  trust  far  greater  responsibilities  to  our  govern- 
ment than  is  now  prudent. 

There  is  no  more  important  lesson  to  impress  on 
the  minds  of  the  toiling  millions  who  are  growing  rest- 
less under  the  burdens  of  monopoly  than  this :  The 
only  remedy  for  monopoly  is  control ;  the  only  power 
that  can  control  is  government  ;  and  to  have  a  gov- 
ernment fit  to  assume  these  momentous  duties,  all  good 
men  and  true  must  join  hands  to  put  only  men  of 
wisdom  and  honor  in  places  of  public  trust. 

There  is  a  virtue  which  shone  in  all  brightness 
when  this  nation  was  born,  not  alone  in  the  hearts  of 
the  commander-in-chief  and  his  brother  heroes,  but  in 
the  hearts  of  the  men  and  women  who  gave  themselves 
to  their  country's  service.  It  glowed  with  all  fervor 
when,  a  quarter  of  a  century  ago,  the  North  fought  to 
sustain  what  the  fathers  had  created,  and  the  rank  and 
file  of  the  South  gave  their  lives  and  all  they  had  for 
what  they  deemed  a  righteous  and  noble  cause. 
Though  the  robust  spirit  of  partisanship  may  seem 
for  a  time  to  have  crowded  out  from  men's  hearts  the 
love  of  their  country,  surely  that  love  still  remains  ;  and 
in  the  days  of  new  import  which  dawn  upon  us,  in  the 
virtue  of  PATRIOTISM  will  be  found  a  sufficient  antidote 
for  the  vice  of  monopoly. 


PART  II. 

A  DECADE  OF  PROGRESS  TOWARD  THE 
DEATH  OF  COMPETITION. 


•65 


INTRODUCTORY. 

THE  decade  which  has  elapsed  since  the  first  edition  of 
this  book  was  published  has  been  one  full  of  significance 
to  the  student  of  economics.  The  general  movement 
toward  the  restriction  or  suppression  of  competition, 
which  we  examined  in  all  its  phases  ten  years  ago,  has 
gone  on  gathering  strength,  until  at  the  present  day  the 
broad  problem  of  monopolies  and  their  control  is  ad- 
mitted to  be  the  greatest  problem  which  modern  civiliza- 
tion has  to  face. 

The  nineteenth  century  has  seen  an  entire  revolution 
in  the  economic  condition  of  the  civilized  world.  Since 
it  began,  the  great  powers  of  nature  have  been  for  the 
first  time  in  the  world's  history  harnessed  for  the  use 
of  man.  Through  their  agency  the  world  has  been 
bound  together  by  new  means  of  transportation  and 
communication  until  it  has  become  a  single  industrial 
and  commercial  whole.  With  the  aid  of  these  powers, 
too,  processes  of  production  have  been  so  improved  and 
the  efficiency  of  labor  has  been  so  multiplied  that  the 
world  has  for  the  first  time  in  its  history  found  itself  with 
a  surplus  of  productive  capacity  above  that  required  to 
supply  the  bare  necessaries  of  life  to  its  population. 

In  the  whole  field  of  the  production  of  wealth,  the 
nineteenth  century  has  accomplished  such  wonders  as 
can  never  be  equalled  in  any  future  period.  In  the 

267 


268  MONOPOLIES  AND    THE  PEOPLE. 

problems  pertaining  to  the  equitable  distribution  of 
wealth,  however,  only  a  beginning  has  been  made.  The 
world  is  still  relying  on  competition  to  regulate  the  dis- 
tribution of  the  products  of  industry  and  is  almost  wholly 
oblivious  of  the  fact  that  in  a  very  large  proportion  of 
modern  industries  competition  has  been  restricted  or 
altogether  abolished. 

The  original  purpose  of  this  work  was  to  survey  the 
field  of  industry  and  commerce  and  determine  to  what 
extent  competition  was  still  active  and  to  what  extent  it 
had  been  restricted  or  abolished.  The  ten  years  which 
have  elapsed  since  that  survey  was  made  have  seen  a 
greater  advance  in  consolidation  and  the  abolition  of 
competition  than  any  decade  that  preceded.  It  will  be 
of  interest,  therefore,  to  make  a  new  survey  of  the  several 
branches  of  industry,  adopting  for  convenience  the  classi- 
fication adopted  in  the  original  chapters,  to  see  what 
lessons  we  can  learn  from  the  decade's  history. 


MONOPOLIES   IN   MANUFACTURING   INDUSTRIES. 

TEN  years  ago  the  most  notable  method  for  the  restric- 
tion of  competition  among  those  engaged  in  manufactur- 
ing was  the  so-called  "  trust  "  organization,  under  which 
the  owners  of  all  the  different  establishments  in  a  given 
line  surrendered  control  of  them  to  trustees.  It  was  a 
more  stable  method  of  combination  than  the  system  by 
trade  associations,  price  agreements,  and  the  establish- 
ment of  joint  selling  agencies  which  preceded  it,  while  it 
had  the  advantage  over  actual  consolidation  that  under 
certain  conditions  each  one  of  the  different  establishments 
could  revert  to  its  original  owners.  The  trust  system, 
however,  was  found  to  be  by  no  means  free  from  defects, 
and  this,  together  with  the  legislation  against  it,  brought 
about  its  abandonment.  In  popular  speech  the  word 
"trust"  is  still  used  indiscriminately  to  denote  almost 
any  trade  combination  or  consolidation;  but,  strictly 
speaking,  there  are  no  more  trusts.  In  their  place 
manufacturers  in  a  great  variety  of  industries  are  taking 
or  have  taken  the  final  step  of  actual  consolidation. 

The  years  1898  and  1899  have  witnessed  the  most  re- 
markable achievements  ever  recorded  in  the  organization 
of  corporations  of  enormous  capital,  under  which  all  the 
strong  competing  establishments  in  a  given  industry  are 

269 


2/0  MONOPOLIES  AND    THE  PEOPLE. 

brought  under  the  ownership  and  control  of  a  single 
corporation.  Many  lists  of  these  combinations  have  been 
published,  but  most  of  them  are  seriously  defective 
through  the  inclusion  of  companies  with  large  nominal 
capital,  formed  to  float  patented  inventions  or  other 
schemes  of  greater  or  less  merit.  The  following  list  of 
the  incorporated  combinations  in  manufacturing  indus- 
tries which  have  been  formed  up  to  July,  1899,  has  been 
compiled  from  all  available  sources,  and  is  believed  to 
be  considerably  more  complete  than  any  heretofore  pub- 
lished. Except  in  a  few  instances  it  includes  only 
combinations  which  have  absorbed  independent  estab- 
lishments that  were  formerly  competing  with  each  other: 

FOOD    PRODUCTS. 


American  Sugar  Refining  Co  ......................  $110,000,000 

American  Beet  Sugar  Co  .........................  20,000,000 

Glucose  Sugar  Refining  Co  .......................  40,000,000 

United  States  Glucose  Co  ........................  5,000,000 

American  Caramel  Co  ............................  1,500,000 

United  States  Flour  Milling  Co  ...................  16,000,000 

Pillsbury-Washburn  Flour  Mills  ...................  10,000,000 

National  Starch  Mfg.  Co  .........................  15,000,000 

American  Cereal  Co.  (Oatmeal)  ...................  4,950,000 

National  Rice  Milling  Co  ........................  2,000,000 

National  Biscuit  Co  ..............................  55,000,000 

Pacific  Coast  Biscuit  Co  ..........................  4,000,000 

American  Fisheries  Co  ...........................  10,000,000 

A.  Booth  &  Co.  (Lake  Fisheries)  .................  7,500,000 

Pacific-American  Fisheries  Co  .....................  5,000,000 

Standard  Sardine  Co  .............................  5,000,000 

Borden  Condensed  Milk  Co  .......................  20,000,000 

New  England  Dairy  Co  ..........................  30,000,000 

Farm  and  Dairy  Product  Co  ......................  15,000,000 

United  Fruit  Co  .................................  20,000,000 

American  Vinegar  Co  ............................  11,000,000 

Amount  carried  forward  ............  ........  $406,950,000 


MANUFACTURING  INDUSTRIES.  2/1 


NAME   OF  COMPANY. 

CAPITALIZATION. 

Amount  brought  forward $406,950,000 

Swift  &  Co 20,000,000 

Erie  Preserving  Co 20,000,000 

American  Chicle  Co.  (Chewing  Gum) 9,000,000 

Royal  Baking  Powder  Co 20,000,000 

Consolidated  Ice  Co 11,255,000 

$487,205,000 
DISTILLING    AND    BREWING. 

American  Spirits  Manufacturing  Co $37,000,000 

Kentucky  Distilleries  and  Warehouse  Co 32,000,000 

Standard  Distilling  and  Distributing  Co 24,000,000 

Merchants'  Distributing  and  Distilling  Co 5,000,000 

Distilling  Co.  of  America  (formed,  in  June,  1899,  by 

combination  of  above  four  companies) 125,000,000 

American  Malting  Co 30,000,000 

San  Francisco  Brewing  Co 20,000,000 

Cleveland  and  Sandusky  Brewing  Co 12,000,000 

United  Brewers  Co.  (Chicago) 8,876,000 

Maryland  Brewing  Co 14,000,000 

Pittsburg  Brewing  Co 19,500,000 

Springfield  Brewers  Co 3,450,000 

Pennsylvania  Central  Brewing  Co 8,400,000 

$241,226,000 
TOBACCO. 

Havana  Commercial  Co $20,000,000 

Union  Tobacco  Co 24,000,000 

Atlantic  Snuff  Co 10,000,000 

Continental  Tobacco  Co 75,000,000 

American  Tobacco  Co 56,000,000 


$185,000,000 
PAPER. 

American  Writing  Paper  Co.  (forming) $25,000,000 

Union  Bag  and  Paper  Co 27,000,000 

International  Paper  Co 55,000,000 

United  States  Envelope  Co 6,750,000 

American  Enameled  Paper  Co 10,000,000 


Amount  carried  forward $123,750,000 


272  MONOPOLIES  AND    THE  PEOPLE. 


Amount  brought  forward  ...................  $123,750,000 

American  Strawboard  Co  .........................  7,250,000 

National  Strawboard  Co  ..........................  6,000,000 

National  Wall  Paper  Co  ..........................  30,000,000 

American  Book  Co.  (School  Books)  ................  5,000,000 

United  Paper  Co.  (tissue)  .........................  3,000,000 


$175,000,000 
TEXTILE   INDUSTRIES. 

American  Felt  Co $5,000,000 

American  Thread  Co 18,000,000 

Standard  Rope  and  Twine  Co 22,500,000 

American  Silk  Mfg.  Co 50,000,000 

National  Carpet  Co.  (forming) 50,000,000 

American  Ginning  Co 5,000,000 

Indo-Egyptian  Compress  Co 15,000,000 

United  States  Worsted  Co.  (forming) 70,000,000 

Am.  Jute  Bagging  Mfg.  Co 2,800,000 

American  Woolen  Co 65,000,000 


$303,300,000 
LEATHER   AND    RUBBER. 

American  Hide  and  Leather  Co $70,000,000 

American  Saddle  Co 1,800,000 

United  States  Leather  Co 130,331,800 

Rubber  Goods  Mfg.  Co 50,000,000 

American  Hard  Rubber  Co 2,500,000 

United  States  Rubber  Co, 39,500,000 

Manufactured  Rubber  Co 6,000,000 


$300,131,800 
WOOD    PRODUCTS. 

National  Casket  Co $10,000,000 

United  States  Chair  Co , .  25,000,000 

American  School  Furniture  Co 10,000,000 

American  Last  Co 3, 500,000 

$48,500,000 


MANUFACTURING  INDUSTRIES. 


273 


GLASS    AND    CLAY    INDUSTRIES. 


NAM.  OP  COMPXNV. 


Trenton  Potteries  Co 
Federal  Sewer  Pipe  Co 
American  Brick  Co.,  N.  Y 
Brick  Combination,  Chicago 
Pittsburg  Plate  Glass  Co 
National  Glass  Co 
Macbeth-Evans  Glass  Co 
American  Window  Glass  Co 
American  Flint  Glass  Co 


$3,ooo,ooo 
25,000,000 
15,000,000 

8,000,000 
10,000,000 

9,000,000 

2,000,000 

30,000,000 
12,000,000 

$114,000,000 


CHEMICALS,    OILS,    PAINTS,    ETC. 


National  Lead  Co.  (White  Lead)  ..................  $30,000,000 

American  Linseed  Oil  Co  .........................  33,500,000 

United  States  Varnish  Co  ........................  36,000,000 

American  Cotton  Oil  Co  .........................  34,800,000 

Continental  Cotton  Oil  Co  ........................  6,000,000 

Standard  Oil  Co  .................................  1  10,000,000 

Mineral  Paint  Co.  (forming)  ......................  12,000,000 

Continental  Cotton  Oil  Co  .......................  10,000,000 

American  Glue  Co  ...............................  2,  100,000 

United  States  Glue  Co.  (forming)  ..................  25,000,000 

National  Salt  Co  ................................  12,000,000 

Celluloid  Co  ...................................  - 

U.  S.  Dyewood  and  Extract  Co  ...................  10,000,000 

Federal  Ink  and  Supply  Co  ......    ................  18,500,000 

International  Cement  Co  .........................  50,000.000 

United  Alkali  Co.,  London  .......................  35,000,000 

American  Agricultural  Chemical  Co.  (fertilizers)  .....  40,000,000 

Diamond  Match  Co  .............................  11,000,000 

Virginia  Carolina  Chemical  Co  ....................  12,000,000 

American  Soda  Co  ...............................  1  ,000,000 

Borax  Consolidated  Co  ...........................  7,000,000 

General  Chemical  Co  ............................  25,000,000 

Union  Carbide  Co  ...............................  6,000,000 


$526,900,000 


274 


MONOPOLIES  AND    THE  PEOPLE. 


IRON    AND    STEEL    PRODUCTS. 

NAME   OF  COMPANY.                                                TOTAL  AUTHORIZED 

CAPITALIZATION. 

Carnegie  Steel  Co $250,000,000 

Federal  Steel  Co 200,000,000 

National  Steel  Co 59,000,000 

Republic  Iron  and  Steel  Co.  (Steel  Sheets) 55,000,000 

Cambria  Steel  Co 17,000,000 

Pennsylvania  Steel  Co 12,250,000 

Park  Steel  Co 10.000,000 

Bethlehem  Steel  Co 15,000,000 

American  Steel  Casting  Co 4,200,000 

Tennessee  Coal,  Iron,  and  R.  R.  Co 31,500,000 

American  Steel  and  Wire  Co 90,000,000 

American  Tin  Plate  Co 50,000,000 

American  Steel  Hoop  Co 33,000,000 

American  Hoop  and  Band  Co 22,000,000 

Union  Steel  and  Chain  Co 60,000,000 

American  Ship  Building  Co 30,000,000 

National  Tin  Plate  and  Stamped  Ware  Co 20,000,000 

National  Enamelling  and  Stamping  Co 30,000,000 

National  Metallic  Roofing  Co 10,000,000 

International  Car  Wheel  Co 15,000,000 

United  States  Cast  Iron  Pipe  and  Foundry  Co 30,000,000 

Shelby  Steel  Tube  Co 10,000,000 

National  Tube  Co 60,000,000 

$1,113,950,000 
MACHINERY    AND    HARDWARE. 

International  Steam  Pump  Co $27,500,000 

American  Car  and  Foundry  Co 60,000,000 

Barney  and  Smith  Car  Co 4,500,000 

Pressed  Steel  Car  Co 25,000,000 

E.  W.  Bliss  Co.  (Sheet  Metal  presses) 

Consolidated  Car  Heating  Co 1,000,000 

United  Shoe  Machinery  Co 25,000,000 

American  Railway  Equipment  Co 22,000,000 

Union  Switch  and  Signal  Co 2,500,000 

American  Wood-Working  Machine  Co 4,000,000 

National  Shear  Co 3,000,000 

Otis  Elevator  Co 11,000,000 

International  Heater  Co 1,800,000 

American  Radiator  Co ....    10,000,000 

Amount  carried  forward $80,300,000 


MANUFACTURING  INDUSTRIES. 


Amount  brought  forward  ...................  $80,300,000 

National  Harrow  Co  .............................  2,000,000 

American  Wringer  Co  ............................  2,500,000 

Herring-Hall-Marvin  Co  .........................  3,300,000 

American  Machine  Co.  (Sewing  Machines)  .........  10,000,000 

American  Axe  and  Tool  Co  .......................  3,872,000 

American  Bicycle  Co.  (forming)  ...................  80,000,000 

American  Soda  Fountain  Co  ......................  3,750,000 

National   Screw  Co  ..............................  10,000,000 

Atlas  Tack  Co  ..................................  2,  100,000 

Torrington  Needle  Co  ............................  4,000,000 

Union  Typewriter  Co  ............................  18,000,000 

American  Pneumatic  Service  Co  ...................  15,000,000 

Oil  Stove  Manufacturers  .........................  6,000,000 


$357,822,000 
ELECTRICAL   MANUFACTURERS. 

Electric  Boat  Co $10,000,000 

National  Carbon  Co 10,000,000 

General  Electric  Co 20,827,000 

Westinghouse  Electric  Co 22,950,000 

American  Bell  Telephone  Co 34,000,000 

$97,777,000 

MINERALS,    METALS,    AND    METAL    PRODUCTS. 

American  Smelting  and  Refining  Co $65,000,000 

Amalgamated  Copper  Co 75,000,000 

Standard  Metal  Co.  (Car  Journal  Bearings) 5,200,000 

American  Type-Founders  Co 3,750,000 

American  Plumbing  Supply  and  Lead  Co 35,000,000 

American  Brass  Co 20,000,000 

International  Silver  Co 24,500,000 

United  Zinc  and  Lead  Co 6,000,000 

Vermont  Marble  Co 3,000,000 


$237,450,000 
Grand  Total $4,188,261,800 

The   foregoing  list  includes,   with  a  few  exceptions, 
only  the  combinations  which  have  taken  the  form  of  in- 


2/6  MONOPOLIES  AND    THE  PEOPLE. 

corporated  companies,  and  it  omits,  therefore,  a  great 
number  of  combinations  in  which  competition  is  limited 
through  agreements  between  the  different  competitors. 
As  every  business  man  knows,  there  is  hardly  a  trade  or 
industry  nowadays  in  which  competition  is  not  more  or 
less  restricted  in  this  manner.  Even  in  the  cases  where 
a  trust  has  been  formed  controlling  part  of  the  producers 
in  a  given  field,  those  outside  of  the  trust  will  frequently 
be  found  to  have  joined  together  in  some  sort  of  trade 
agreement;  and  while  at  first  there  may  be  sharp  com- 
petition between  the  trust  and  the  combination  of  inde- 
pendent competitors,  the  next  step  is  an  agreement 
between  the  trust  and  the  combination. 

To  make  a  list  of  all  the  competition-killing  trade 
agreements  would  be  impossible,  nor  is  it  necessary  to 
show  the  extent  to  which  competition  in  our  manufactur- 
ing industries  has  been  abolished.  The  above  list  of 
actually  organized  trusts  is  certainly  significant  enough. 

It  will  be  seen  that  the  total  capitalization  of  the  com- 
panies summarized  above  is  in  round  numbers  over  four 
billion  dollars. 

It  is  fair  to  say  that  the  sum  given  is  in  most  cases  the 
authorized  capital  stock,  of  which  in  many  cases  a  certain 
amount  has  not  been  issued;  on  the  other  hand,  the 
proportion  not  issued  is  usually  small. 

It  will  be  noticed  that  the  above  list  is  confined  strictly 
to  manufacturing  companies,  and  for  the  most  part  to 
those  manufacturing  staple  articles.  Monopolies  based 
primarily  on  the  control  of  patents  have  not  been  in- 
cluded, neither  have  the  great  companies  which  control 
the  distribution  of  gas  and  electric  current  and  the  rail- 
way transportation  lines  on  city  streets.  We  have  omitted 
also  the  monopolies  in  transportation  and  communica- 


MANUFACTURING  INDUSTRIES. 

tion,  such  as  the  telegraph,  the  telephone,  and  railways, 
for  these,  with  the  corporations  for  municipal  service 
already  mentioned,  come  under  the  head  of  natural 
monopolies.  Monopolies  in  mineral  production  are 
likewise  omitted,  except  as  manufacturing  trusts  have 
themselves  secured  control  of  the  sources  of  their  raw 
material. 

It  is  also  fair  to  say  that  at  least  one  half  of  the  above 
capitalization,  and  very  likely  two  thirds,  is  nothing  but 
water,  and  in  many  individual  trusts  the  proportion  rises 
higher  still.  In  other  words,  the  trusts  have  been  capital- 
ized according  to  the  most  sanguine  estimates  of  their 
earning  power,  without  regard  to  the  value  of  their  plant 
and  their  tangible  property. 

In  reviewing  the  various  causes  which  have  led  to  com- 
binations and  consolidation,  in  the  first  edition  of  this 
book,  one  cause  was  omitted  which  is  doubtless  more 
potent  than  any  other  at  the  present  time  in  bringing 
about  this  final  stage  in  the  suppression  of  competition 
in  manufacturing  industries.  This  cause  is  the  oppor- 
tunity for  making  great  profits  which  the  stock  market 
offers  to  the  promoter  of  trade  consolidations.  In  the 
"  lean  "  years  from  1893  to  1896,  manufacturers  in  very 
many  lines  found  themselves  obliged  to  accept  lower 
prices  for  their  product  than  ever  before.  Bankruptcies 
and  receiverships  were  on  every  hand  ;  competition 
amongst  sellers  was  phenomenal  in  its  force;  many  of 
the  combinations  through  the  medium  of  trade  agree- 
ments which  had  been  organized  in  the  '8o's  and  early 
'go's  went  to  pieces,  and  gave  rise  to  much  wise  prophesy 
that  such  would  be  the  ultimate  fate  of  all  combinations 
formed  to  suppress  competition. 

In  those  four  years,  American  manufacturers  came  to 


278  MONOPOLIES  AND    THE  PEOPLE. 

realize  that  the  old  conditions  of  high  prices  and  inflated 
profits  in  the  production  of  the  great  staples  of  consump- 
tion had  permanently  passed.  When,  therefore,  there 
came  a  permanent  revival  of  business  in  1898,  accom- 
panied by  a  great  advance  in  the  stock  market,  and  when 
it  was  found  that  the  public  was  ready  and  eager  to  buy 
the  stocks  of  manufacturing  combinations  at  fancy  prices, 
the  opportunity  was  eagerly  seized  by  manufacturer  and 
promoter.  Companies  were  organized  with  capitaliza- 
tions heretofore  unheard  of,  a  large  part  of  which  repre- 
sented nothing  but  water;  yet  their  securities  were  eagerly 
purchased.  The  manufacturer  received  in  many  cases 
more  actual  cash  in  hand  than  would  have  been  required 
to  duplicate  his  plant,  while  the  promoter  reaped  a 
fortune. 

This  lasted  as  long  as  the  public  continued  to  buy 
securities  of  whose  value  they  had  no  knowledge  at  prices 
that  made  every  manufacturer  eager  to  sell  out  his  busi- 
ness. When  the  public's  appetite  for  such  securities  was 
appeased,  the  business  of  trust  manufacture  settled  down 
to  its  normal  rate.  At  this  rate  it  will  without  doubt 
continue,  with  such  variations  as  the  ups  and  downs  of 
the  financial  world  may  cause,  and  so  long  as  there  are 
businesses  left  to  combine,  unless,  indeed,  the  people 
shall  be  aroused  to  demand  the  stoppage  by  law  of  such 
gambling  in  the  industries  by  which  the  world's  wants 
are  supplied. 


II. 

.MONOPOLIES   OF   MINERAL   WEALTH. 

THE  control  by  monopolies  of  various  important 
mineral  products  has  been  greatly  stimulated  during  the 
past  ten  years  by  the  growth  of  monopolies  in  the  manu- 
facturing industries.  On  the  one  hand,  producers  of  raw 
material  have  in  many  cases  beheld  the  number  of  pur- 
chasers growing  fewer  until  they  have  foreseen  that 
competition  in  the  purchase  of  their  product  would  soon 
cease,  and  they  would  be  forced  to  accept  such  prices  as 
the  purchaser  might  choose  to  fix.  As  an  illustration  of 
this,  we  may  note  that  when  the  American  Smelting  and 
Refining  Company  was  organized  in  the  spring  of  1899, 
mine  owners  in  the  Joplin,  Mo.,  mining  district  formed 
an  agreement  to  fix  the  prices  for  their  product  and  pre- 
vent the  smelting  combination  from  lowering  prices. 

On  the  other  hand,  the  huge  corporations  which  have 
secured  control  of  the  American  iron  and  steel  industry 
have  endeavored  to  secure  the  best  deposits  of  iron  ore 
and  of  coking  coal  to  ensure  to  themselves  more  perfectly 
the  absolute  control  of  the  market.  That  they  have  to  a 
large  extent  succeeded  is  now  well  known.  They  were 
impelled  to  this  course,  it  is  fair  to  say,  largely  as  a 
matter  of  self-protection;  for  combinations  among  the 
ore  producers  in  the  region  of  iron-ore  production  sur- 

279 


280  MONOPOLIES  AND    THE  PEOPLE. 

rounding  Lake  Superior  have  at  times  been  able  to  fix 
the  prices  that  ore  buyers  must  pay.  Again,  when  once 
the  scramble  began,  every  iron  and  steel  producer  who 
cared  to  continue  in  business  was  obliged  to  join  in  it  or 
run  the  risk  of  being  cut  off  from  his  supplies  of  raw 
material. 

It  is  sometimes  argued  that  iron  ore  is  so  widely  and 
abundantly  scattered  that  no  attempt  to  control  the 
whole  available  supply  can  be  successful.  This  is  doubt- 
less true,  but  under  modern  industrial  conditions  there 
is  no  need  to  control  anything  but  the  best  and  most 
economical  sources  of  production  in  order  to  create  a 
monopoly.  There  are  plenty  of  iron  ores  still  to  be  won 
in  the  States  of  Pennsylvania  and  New  York;  but,  under 
recent  market  conditions,  they  can  no  more  be  mined 
and  smelted  and  sold  in  competition  with  the  product  of 
the  Mesaba  range  than  if  they  were  non-existent. 

That  the  great  iron  and  steel  producing  concerns  own 
the  mines  from  which  they  obtain  their  supply  of  ore,  is 
true  not  only  of  the  companies  using  the  Lake  Superior 
ore,  but  of  most  of  the  other  American  companies.  The 
Maryland  Steel  Company,  for  example,  owns  the  famous 
mines  near  Santiago,  Cuba;  the  Pueblo,  Colo.,  steel 
mills  obtain  ores  from  their  own  mines;  and  the  Tennes- 
see Coal,  Iron,  &  R.  R.  Company  owns  both  coal  and 
iron  mines  in  addition  to  its  blast  furnaces. 

Turning  next  to  coal,  which  ranks  with  iron  as  our  most 
valuable  mineral  product,  we  find  numerous  monopolies 
in  existence.  The  anthracite  supply  in  Pennsylvania 
is  controlled  by  the  railways  which  tap  the  anthra- 
cite region  and  which  have  for  years  been  joined  in  an 
agreement  to  maintain  freight  rates  on  anthracite  at  a  high 
level,  amounting  to  two  or  three  times  the  rate  per  ton- 


MONOPOLIES  OF  MINERAL    WEALTH.        28 1 

mile  paid  on  soft  coal.  The  independent  coal  miners  are 
obliged  to  send  their  coal  to  market  by  the  railways,  and 
at  the  time  this  is  written  they  are  so  incensed  by  the 
conditions  which  they  have  so  long  endured  that  they  are 
seriously  at  work  upon  a  scheme  to  construct  an  inde- 
pendent railway  from  the  anthracite  regions  to  some 
point  upon  tide-water. 

In  bituminous  coal  production,  the  situation  remains 
very  much  the  same  as  at  the  time  when  the  former 
edition  of  this  book  was  published.  Now,  as  then, 
combinations  among  the  mines  supplying  a  given  market 
are  very  common,  and  are  effectual  in  raising  the  price 
to  a  point  that  will  materially  increase  profits  without 
opening  the  market  to  coal  from  other  and  more  distant 
fields.  The  tendency  for  these  combinations  to  take  the 
form  of  actual  consolidation  is  a  notable  one;  and  when 
such  consolidations  occur,  the  task  of  forming  mutual 
agreements  between  the  producers  of  different  fields 
at  points  where  their  products  compete  is  rendered 
easy. 

It  is  a  common  error  to  assume  that  because  a  mon- 
opoly covers  only  a  limited  field,  it  is  of  small  import- 
ance. This  is  very  far  from  being  the  case.  The  coal 
producers  in  a  given  district  when  they  combine  to  fix 
prices  for  their  product  may  be  able  to  exact  a  very 
heavy  tribute  from  the  consumers  who  naturally  take 
their  supply  from  that  district,  and  they  may  do  this 
without  raising  prices  above  the  point  at  which  coal  from 
more  distant  fields  can  be  transported.  A  combination 
has  existed  for  some  years  among  the  firms  which  supply 
New  York  City  and  vicinity  with  terra-cotta  fire-proofing 
materials.  The  great  terra-cotta  producing  region  in 
Eastern  Ohio  was  not  included  in  this  combination,  but 


282  MONOPOLIES  AND    THE  PEOPLE. 

manufacturers  in  that  region  could  not  ship  such  bulky 
material  so  far  and  offer  effective  competition. 

Even  common  brick  clay,  perhaps  the  most  widely 
distributed  of  all  mineral  products,  has  been  made  the 
subject  of  a  monopoly.  In  1898,  a  syndicate  of  capital- 
ists had  thorough  explorations  made  of  the  clay  deposits 
in  the  Hudson  valley  from  which  New  York  City  has  long 
obtained  its  chief  supply  of  brick.  They  found  that  the 
clay  deposits  were  so  limited  in  area  that  their  entire 
control  was  feasible.  Such  control  was  secured,  and  the 
American  Brick  Company,  with  $15,000,000  capital, 
now  controls  the  future  brick  supply  of  the  metropolis. 
A  similar  combination,  with  $8,000,000  capital,  is  said 
to  control  the  brick  supply  of  Chicago,  and  another 
controls  the  clay  deposits  in  the  Connecticut  Valley  from 
New  Haven  to  Springfield. 

In  the  metal  which  next  to  iron  is  of  greatest  commer- 
cial importance,  copper,  the  monopolies  of  greatest  note 
are  those  due  to  the  possession  by  private  owners  of  the 
deposits  of  greatest  richness.  As  has  been  before  pointed 
out,  such  an  advantage  in  production  constitutes  a  genu- 
ine monopoly,  and  one  which  directly  affects  the  public. 
The  case  is  directly  parallel  to  that  just  discussed.  In 
the  one  case  a  producer  has  an  advantage  of  geographi- 
cal location,  in  the  other  he  has  the  advantage  of  possess- 
ing a  deposit  of  great  richness.  Either  can  alike  raise 
his  price  to  such  a  point  as  will  just  prevent  outside 
competition  from  entering  the  field. 

Rumors  of  other  and  more  far-reaching  combinations 
to  create  monopolies  among  producers  of  copper  have 
been  numerous,  but  so  far  have  not  been  verified  by  actual 
events,  save  by  the  formation  and  capitalization  of  the  Am- 
algamated Copper  Company,  with  $75,000,000  capital. 


MONOPOLIES  OF  MINERAL    WEALTH.        283 

In  the  zinc  market,  combinations  among  producers  to 
fix  prices  have  been  frequent  during  the  decade,  but  have 
not  generally  been  lasting.  The  last  agreement  to  regu- 
late prices,  made  in  1897,  appears  to  have  been,  on  the 
whole,  successful. 

Among  the  minor  mineral  productions,  most  of  which 
are  found  in  a  limited  field,  competition  has  in  many 
cases  been  largely  eliminated.  In  the  diamond  market, 
the  great  Kimberley  mines  in  South  Africa  furnish  the 
chief  supply  of  the  world,  and  production  is  fixed  at 
what  the  world's  markets  will  absorb  without  a  fall  in 
price.  During  the  six  years  from  1891  to  1896  inclusive, 
the  De  Beers  Consolidated  Mines  Company,  which  con- 
trols the  Kimberley  district,  paid  in  dividends  the  sum 
of  $23,975,000.  In  1898  it  paid  over  $9,000,000  to  the 
holders  of  its  securities. 

The  borax  trade  of  the  United  States  has  been  for 
years  controlled  by  the  Pacific  Coast  Borax  Company. 
In  1897  the  quotations  for  borax  in  London  averaged 
about  two  cents  per  pound  less  than  the  New  York 
prices. 

In  potash  salts,  the  world's  supply  is  obtained  from 
deposits  in  Germany.  The  production  is  controlled  by 
a  syndicate  which  sells  through  its  own  agents  and  fixes 
prices  for  its  products  throughout  the  world  at  the  be- 
ginning of  each  year. 

Quicksilver,  a  substance  of  the  greatest  importance  in 
many  branches  of  manufacture  and  metallurgy,  is  largely 
controlled  by  the  great  Rothschilds'  banking  house  in 
London.  Platinum,  a  metal  of  equally  great  importance 
in  the  laboratory  and  in  electrical  and  chemical  work,  is 
also  alleged  to  be  in  the  control  of  a  foreign  syndicate. 

In  Sicily,  the  sulphur  deposits  which  were  formerly 


284  MONOPOLIES  AND    THE  PEOPLE. 

worked  by  a  number  of  independent  companies,  are  now 
operated  by  the  Anglo-Sicilian  Sulphur  Company,  and 
the  price  of  sulphur  is  maintained  at  a  fixed  level. 

In  the  marble  trade,  the  Vermont  Marble  Company 
has,  for  many  years,  been  the  chief  figure  in  the  market; 
its  success  has  been  due,  however,  to  its  control  of 
facilities  for  manufacture  and  marketing  rather  than  to 
control  of  quarries.  Various  other  combinations  are 
noted  from  time  to  time  in  the  trade  in  granite  and  other 
building  stones.  They  generally  cover  a  local  field  only, 
but,  as  has  been  already  pointed  out,  they  may,  never- 
theless, be  able  to  control  prices  throughout  a  con- 
siderable territory. 


III. 


MONOPOLIES   OF   TRANSPORTATION   AND   COM- 
MUNICATION. 

RAILWAYS. — Ten  years  ago  the  belief  was  still  almost 
universal  that  railway  rates  should  be  regulated  by  com- 
petition. Only  a  few  economists  and  railway  managers 
had  learned  that  free  competition  was  an  impossibility  in 
the  railway  service.  During  the  past  decade,  however, 
there  has  been  a  wonderful  growth  in  the  public  under- 
standing upon  this  point.  The  building  of  competitive 
railways  to  parallel  existing  lines  has  almost  wholly 
ceased.  The  passage  of  laws  designed  to  prevent  the 
consolidation  of  competing  lines,  and  to  foster  the  com- 
petition of  railways  with  each  other,  has  likewise  almost 
ceased.  The  public  has  generally  come  to  accept  the 
principle  that  the  regulation  of  railway  rates  is  to  be 
effected  through  the  control  over  these  rates  possessed 
by  the  State  and  national  legislatures,  and  delegated  by 
them  to  the  railway  commissions,  and  not  through  reli- 
ance upon  competition. 

Nevertheless,  it  is  fair  to  say  that  competition  between 
railway  companies  on  certain  classes  of  traffic  has  had  a 
longer  life  than  seemed  at  all  probable  a  decade  ago. 
On  the  through  traffic  between  the  great  commercial 
centres  where  a  choice  of  several  routes  is  possible,  com- 

285 


286  MONOPOLIES  AND    THE  PEOPLE. 

petition  has  been  a  potent  force,  but  a  force  which  has 
by  no  means  inured  wholly  to  the  public  benefit.  While 
it  has  acted  to  reduce  rates,  it  has  helped  the  large  ship- 
per rather  than  the  small  shipper.  The  latter  has  always 
had  to  pay  the  schedule  rate,  whatever  that  might  be. 
The  large  shipper  has  often  been  able  to  secure  special 
rates,  not  only  because  the  volume  of  his  business  was 
great  enough  to  be  worth  bidding  for,  but  sometimes 
because  he  could  make  it  worth  the  while  of  the  railway 
official  to  grant  him  the  reduced  rate.  Of  course,  this 
class  of  rate  reductions  is  of  little  benefit  to  the  public. 
It  merely  helps  the  great  corporations  to  drive  their 
small  rivals  out  of  business,  and  fosters  dishonesty  among 
those  in  positions  of  trust. 

It  is  fair  to  say  that  while  cases  of  this  sort  are  com- 
mon, they  are  by  no  means  universal.  There  has  been 
honest  competition  as  well  as  dishonest,  and  this,  together 
with  the  pressure  of  public  opinion,  backed  by  the  know- 
ledge that  courts  and  legislatures  and  commissions  had 
power  to  compel  rate  reductions,  has  brought  about  re- 
ductions in  railway  rates  in  many  sections  where  exorbit- 
ant rates  still  ruled  a  decade  ago. 

Notwithstanding  this,  it  cannot  be  said  that  the  problem 
of  fixing  railway  rates  so  that  they  shall  be  at  once  equit- 
able to  the  public  and  the  railway  owner  is  any  nearer 
solution  than  ever.  At  present  we  are  going  along  in  a 
haphazard  fashion.  In  some  sections  the  railways 
charge  what  rates  they  please,  earn  exorbitant  profits 
upon  their  investment,  and  the  public  does  not  think  of 
questioning  the  rates  or  objecting.  In  other  sections, 
the  State  authorities  have  taken  the  matter  of  the  fixing 
of  rates  into  their  own  hands,  and  have,  in  some  cases, 
fixed  rates  which  were  probably  unjust  to  the  railways. 


TRANSPORTATION  AND   COMMUNICATION.    287 

In  such  cases  the  only  resource  for  the  railways  has  been 
an  appeal  to  the  United  States  courts. 

Queerly  enough,  while  the  principle  is  fully  established 
that  the  States  can  fix  railway  rates  if  they  choose,  the 
old  doctrine  that  free  competition  must  be  preserved  is 
not  yet  entirely  abandoned.  The  Sherman  anti-trust 
law,  for  example,  which  was  aimed  at  the  trusts  in  man- 
ufacturing industries,  was  held  by  the  Supreme  Court  not 
to  apply  to  these  at  all,  but  to  apply  to  the  railway  com- 
panies. Under  the  law  as  at  present  interpreted,  there- 
fore, the  railway  companies  cannot  legally  agree  with 
each  other  to  fix  uniform  rates.  The  railways  are  not 
compelled  to  compete.  No  law  can  compel  that;  they 
are  merely  forbidden  to  use  any  machinery  to  restrict 
competition.  The  practical  effect  6f  the  law  is  to  dis- 
solve the  formal  organizations  for  the  maintenance  of 
rates;  and  in  their  place  is  substituted  informal  and 
secret  arrangements  between  the  railway  officials,  which 
are  far  more  apt  to  lead  to  discriminations,  secret  rate- 
cutting,  and  various  similar  evils,  than  the  old  plan  of 
fixing  rates  through  traffic  associations. 

The  only  serious  attempt  to  fix  railway  rates  upon  an 
equitable  basis  that  has  been  made  in  any  State  is  that 
which  has  been  undertaken  in  Texas.  The  principle 
has  been  accepted  there  that  a  railway  or  any  other 
natural  monopoly  is  entitled  to  charge  rates  high  enough 
to  enable  it  to  earn  a  fair  rate  of  interest  on  the  actual 
value  of  its  property,  and  no  higher.  Of  course  it  will 
be  asked,  what  is  the  value  of  a  railway  apart  from  its 
earning  capacity  ?  The  answer  is,  that  it  is  what  it 
would  cost  to  replace  the  road  at  the  present  time.  In 
other  words,  a  natural  monopoly  should  be  valued  in  the 
same  way  as  other  property.  A  man  buys  a  house  or  a 


288  MONOPOLIES  AND    THE  PEOPLE. 

machine  or  a  book.  Ten  years  later  he  finds  that  he 
could  replace  the  house  or  machine  or  book  for  half  what 
it  originally  cost  him,  hence  the  value  has  been  reduced 
one  half.  If  he  rents  his  house,  he  must  be  content  with 
rentals  or  income  based  on  the  reduced  valuation.  So 
likewise  must  the  railway  owner. 

To  carry  this  principle  into  effect,  the  State,  through 
its  railway  commission,  actually  measured  the  entire 
railway  mileage  of  the  State,  and  estimated  the  cash  cost 
at  the  present  time  of  earthwork,  bridging,  tracks,  struc- 
tures, and  everything  necessary  to  place  the  railway  in 
its  present  condition.  In  other  words,  the  cost  of  re- 
placing the  railway  was  estimated.  The  value  so  deter- 
mined was  then  taken  as  the  sum  on  which  the  railway 
company  is  entitled  to  earn  a  reasonable  rate  of  interest. 
No  more  scientific  and  creditable  piece  of  work  has  been 
done  anywhere  in  the  attempt  to  solve  the  knotty  prob- 
lem of  the  State  control  of  natural  monopolies. 

Space  forbids  the  discussion  in  further  detail  of  the 
great  problem  of  railway  monopolies  and  their  relation 
to  the  people.  It  can  only  be  said  that  the  past  decade 
has  seen  a  great  advance  in  the  direction  of  governmental 
control,  and  the  next  decade  is  likely  to  see  a  greater 
advance.  It  is  more  and  more  coming  to  be  recognized 
that  the  interest  of  the  public  in  the  operation  of  railway 
lines  is  far  greater  even  than  the  interest  of  those  who 
own  railway  stocks  and  bonds.  The  right  of  the  public 
to  have  a  voice  in  railway  management  is  already  well 
established,  and  as  soon  as  the  people  are  confident  that 
governmental  agencies  can  be  relied  upon  to  protect  the 
people's  interests,  there  will  be  a  general  demand  that 
the  work  shall  be  undertaken. 

Ten  years  ago,  the  writer  proposed  a  plan  involving 


TRANSPORTATION  AND   COMMUNICATION.    289 

governmental  ownership  of  the  fixed  plant  of  the  rail- 
ways in  combination  with  rental  of  the  lines  to  private 
corporations  for  operation.  The  time  was  not  ripe, 
however,  for  so  radical  a  change,  and  the  alteration  in 
conditions  during  the  decade  would  make  it  in  many 
respects  inapplicable  now.  The  weaknesses  inherent  in 
the  present  plan  of  control  by  State  and  national  railway 
commissions,  however,  are  more  and  more  apparent  year 
by  year. 

Under  the  present  circumstances,  the  writer  believes 
that  the  most  practical  method  for  the  reform  of  railway 
abuses  is  the  appointment  of  government  directors, 
having  equal  powers  with  those  elected  by  the  stock- 
holders. Such  directors  could  compel  the  railway  com- 
panies with  which  they  were  connected  to  obey  the  laws, 
refrain  from  discrimination,  and  keep  rates  as  low  as  was 
consistent  with  a  fair  return  to  the  railway  owners. 
Such  an  exercise  of  the  State's  legal  power  to  control 
may  seem  radical ;  but  it  is  really  no  more  radical  than 
the  powers  which  State  railway  commissions  now  hold 
and  in  some  cases  attempt  to  exercise.  Such  a  reform 
would  in  many  cases  be  of  great  benefit  to  the  holders  of 
railway  stocks  and  bonds,  as  well  as  to  the  public,  and 
in  combination  with  the  amendment  of  laws  governing 
railway  companies  upon  more  scientific  lines,  it  would 
be  possible  to  effect  every  benefit  that  has  ever  been 
claimed  by  those  who  have  advocated  the  complete  gov- 
ernment operation  of  all  railway  lines. 

WATER  TRANSPORTATION. — It  is  a  common  idea  that 
while  transportation  by  land  is  apt  to  become  a  mon- 
opoly, in  transportation  by  water  free  competition  pre- 
vails. This  was  indeed  true  in  the  days  when  sails  were 
the  motive  power,  and  remained  true  for  many  years 


290  MONOPOLIES  AND    THE  PEOPLE. 

after  steam  supplanted  sails.  Under  modern  conditions 
of  ocean  traffic,  however,  steamers  ply  from  port  to  port 
with  almost  the  regularity  of  railway  trains.  The  bulk 
of  the  ocean  commerce  of  the  world  is  carried  to-day 
not  by  the  "  tramp  "  vessels,  but  by  vessels  owned  by 
shipping  companies,  and  run  in  regular  service  between 
ports.  Passenger  traffic,  of  course,  is  handled  exclu- 
sively by  such  lines,  and  all  the  high  class  freight  and  a 
large  proportion  of  the  great  commercial  staples  are  also 
transported  by  them. 

When  the  number  of  competing  units  is  thus  reduced, 
combination  to  fix  prices  inevitably  follows,  and  we  find 
that  agreements  to  fix  rates,  not  only  on  passenger  but 
on  freight  traffic,  are  everywhere  common.  In  England, 
where  the  shipping  business  has  developed  as  in  no  other 
country  in  the  world,  "Chambers  of  Shipping"  are 
organized  in  the  different  ports,  in  which  the  principal 
ship  owners  join  to  fix  rates;  and  the  combination  is  even 
an  international  one,  both  the  German  and  English  ship- 
ping companies  being  united  in  an  agreement  for  the 
maintenance  of  rates.  In  the  South  African  trade,  for 
example,  a  German-British  combination  controls  the 
trade  by  a  system  of  rebates,  ten  per  cent,  being  de- 
ducted from  the  freight  rate  and  returned  to  each  shipper 
on  condition  that  he  ships  no  goods  by  vessels  not  in  the 
combination.  The  chairman  of  the  Peninsular  and 
Oriental  Company,  in  his  report  to  the  annual  share- 
holders' meeting. in  December,  1897,  said: 

"It  is  not  possible  profitably  to  carry  on  shipping 
business  unless  there  is  uniformity  of  tariff  settled  by  a 
'  conference  '  of  the  shipping  companies." 

It  may  be  thought  from  the  above  that  the  "  shipping 
rings,"  as  they  are  commonly  called,  have  merely  fixed 


TRANSPORTATION  AND   COMMUNICATION.    29 1 

stable  rates  which  would  ensure  to  themselves  a  fair  re- 
turn upon  their  investment.  If  this  be  so,  however,  it 
is  difficult  to  explain  the  great  public  enmity  to  these 
combinations  which  has  been  aroused.  Mercantile  and 
trade  assocations  in  India,  in  South  Africa,  and  in  all 
parts  of  England  have  hotly  denounced  them.  In 
March,  1898,  the  Association  of  Chambers  of  Commerce 
of  England  adopted  a  resolution  calling  on  the  govern- 
ment to  withdraw  subsidies  from  shipping  companies 
which  joined  in  agreements  whereby  British  shippers 
were  charged  higher  rates  than  their  foreign  competitors. 

It  is  worth  especial  notice  that  the  combinations 
among  the  minor  shipping  lines,  and  those  between 
shipping  companies  of  different  nationality,  are  things 
of  very  recent  origin.  They  well  illustrate  the  general 
tendency  in  all  classes  of  trade  toward  the  suppression 
of  competition,  and  the  fact  that  combinations  for  that 
purpose  do  not  stop  at  national  boundaries. 

OCEAN  CABLES. — Another  illustration  of  the  fact  that 
monopolies  of  the  present  day  are  far  wider  than  national 
boundaries,  is  furnished  by  the  companies  controlling 
submarine  cables.  The  law  that  the  intensity  of  com- 
petition increases  with  the  reduction  in  the  number  of 
competing  units  until  combination  finally  takes  its  place, 
has  been  well  proved  by  the  cable  companies'  wars  and 
by  the  consolidations  and  agreements  to  maintain  rates 
which  have  followed.  At  present,  free  competition  in 
cable  service  is  practically  unknown,  and  the  high  prices 
charged  are  such  a  serious  burden  that  in  England  and 
English  colonies  considerable  agitation  has  taken  place 
looking  to  the  government  ownership  of  cable  lines. 

THE  TELEGRAPH  AND  THE  TELEPHONE. — The  Western 
Union  Telegraph  Company  still  controls,  as  it  did  ten 


292  MONOPOLIES  AND    THE   PEOPLE. 

years  ago,  the  entire  telegraph  system  of  the  United 
States.  Its  only  important  competitor  during  that  time, 
the  Postal  Company,  has  for  years  been  operated  under 
a  working  agreement  with  its  rival  under  which  no  com- 
petition between  the  two  companies  occurs.  During 
the  past  ten  years,  however,  a  new  method  of  long- 
distance communication  has  entered  the  field,  the  long- 
distance telephone.  This,  also,  has  been  operated  in 
harmony  with  the  Western  Union  Company,  and  it  fills 
so  different  a  field  from  the  telegraph  that  except  on  a 
small  part  of  their  business  the  two  services  are  by  no 
means  in  competition  with  each  other. 

Turning  now  to  the  telephone  itself,  it  will  be  remem- 
bered that  ten  years  ago  the  public  was  looking  forward 
with  anticipation  to  the  expiration  of  the  Bell  Telephone 
Company's  patents,  and  great  benefits  were  expected 
from  the  introduction  of  competition  in  the  telephone 
business.  The  patents  expired,  and  the  expected  num- 
ber of  competing  telephone  manufacturers  were  forth- 
coming, notwithstanding  the  efforts  of  the  Bell  Company 
to  protect  its  monopoly  by  securing  the  issue  of  further 
patents.  But  the  expected  competition  in  the  telephone 
business  has  not  appeared,  save  in  a  few  sections  of  the 
West  and  in  telephones  for  interior  communication  be- 
tween the  different  departments  of  a  factory  or  office. 
The  subsidiary  corporations  licensed  by  the  Bell  Com- 
pany are  as  secure  as  ever  in  their  control  of  the  great 
cities.  It  is  now  beginning  to  be  realized  by  the  public 
that  the  strength  of  this  company's  monopoly  lies  not  in 
its  patents,  but  in  the  fact  that  practically  all  the  busi- 
ness is  in  its  hands,  and  that  the  control  of  the  long- 
distance lines,  by  which  every  telephone  instrument  is 
placed  in  communication,  not  only  with  those  of  its  own 


TRANSPORTATION  AND   COMMUNICATION".    293 

exchange,  but  with  those  in  every  other  exchange  within 
a  radius  of  a  thousand  miles,  gives  the  associated  Bell 
corporations  such  a  strength  that  the  establishment  of  a 
general  competing  system  would  be  the  height  of  absurd- 
ity. Capital  would  not  engage  in  such  an  enterprise, 
and  ought  not  to  be  allowed  to,  for  combination  would 
inevitably  succeed  a  short  season  of  competition,  and  in 
the  end  the  public  would  have  to  pay  the  interest  on  the 
money  wasted  in  needless  duplication  of  facilities. 

Ten  years  ago,  the  telephone  was  properly  classed 
among  the  natural  municipal  monopolies.  It  is  even 
more  absurd  to  have  two  competing  telephone  systems 
in  a  city  than  to  have  two  competing  gas  companies,  for 
the  full  measure  of  benefit  is  not  received  in  a  telephone 
system  unless  a  subscriber  is  connected  with  the  greatest 
possible  number  of  other  subscribers.  At  present  the 
telephone  ranks  with  the  telegraph  as  a  great  natural 
monopoly  covering  the  entire  country.  That  we  should 
go  on  permitting  the  telephone  companies  to  tax  us  year 
after  year  to  pay  enormous  salaries  and  fat  dividends, 
just  as  if  the  industry  were  one  open  to  free  competition, 
simply  betrays  our  great  ignorance  of  economics.  In 
nearly  every  other  civilized  nation,  the  telephone  systems 
are  either  owned  and  operated  by  the  government  or  are 
under  strict  governmental  control,  with  regulation  of  the 
rates  to  be  charged. 

WAREHOUSES. — The  business  of  warehousing  is  one 
which  has  proved  peculiarly  subject  to  monopoly  at 
every  great  commercial  centre.  At  the  port  of  New 
York,  a  great  number  of  the  warehouses  on  the  Brooklyn 
water  front  are  owned  by  the  Brooklyn  Wharf  &  Ware- 
house Company,  with  a  capitalization  of  $30,000,000. 
At  Buffalo,  the  high  prices  charged  by  the  combination 


294  MONOPOLIES  AND    THE  PEOPLE. 

of  grain-elevator  owners  has  been  for  a  score  of  years 
the  subject  of  public  agitation.  In  Chicago,  the  mon- 
opoly of  warehousing  in  connection  with  the  live-stock 
and  packing  trade,  is  held  by  the  Chicago  Junction  Rail- 
ways &  Union  Stock  Yards  Company,  a  corporation  with 
a  capital  of  $26,000,000.  Legislation  fixing  the  charges 
for  warehousing  in  grain  storage  in  New  York  and  in 
Illinois  has  been  upheld  by  the  United  States  Supreme 
Court.  It  seems  clear  that  under  the  conditions  obtain- 
ing in  any  great  city,  the  warehouse  business  is  really  a 
natural  monopoly,  and  as  such  should  be  subject  to 
public  regulation. 

EXPRESS  COMPANIES. — The  prompt  carriage  of  parcels 
between  different  points  has  come  to  be  an  industry  of 
great  magnitude,  and  one  which  is  peculiar  in  that  while 
it  represents  great  capitalization  and  earning  power,  it 
involves  a  very  small  actual  investment.  The  capitaliza- 
tion of  the  great  express  companies  of  the  United  States 
is  over  a  hundred  million  dollars,  on  nearly  all  of  which 
large  dividends  are  paid;  yet  the  actual  value  of  the 
property  which  the  express  companies  own  is  very  small. 
The  business  is  really  a  natural  monopoly,  and  one  which 
imposes  serious  burdens  on  the  people;  yet  nothing 
whatever  has  thus  far  been  done  towards  bringing  it 
under  government  regulation  and  control. 


IV. 

MUNICIPAL   MONOPOLIES. 

IN  no  department  of  sociology  has  there  been  such  a 
surprising  growth  in  public  intelligence  during  the  past 
decade  as  in  the  matter  of  the  relations  of  cities  to  the 
corporations  which  use  their  streets.  It  has  come  to  be 
generally  understood  in  all  parts  of  the  country  that 
competition  in  furnishing  a  city  with  gas,  water,  electric 
light,  street  railway  service,  etc.,  is  wholly  out  of  place. 
When  it  occurs,  it  is  recognized  as  only  a  temporary 
phenomenon  and  something  that  can  have  no  permanent 
value  in  giving  to  the  public  good  service  at  low  rates. 
Further  than  this  the  public  has  made  a  great  growth  in 
comprehension  of  the  idea  that  franchises  for  the  use  of 
city  streets  belong  to  the  public  and  should  be  kept  for 
the  public  benefit.  There  is  hardly  a  case  in  which  the 
voters  have  been  given  the  opportunity  to  choose  be- 
tween private  and  public  ownership  of  the  water  supply 
of  a  city,  for  example,  that  they  have  not  given  a  de- 
cided majority  in  favor  of  public  ownership. 

The  acquirement  by  cities  of  the  privately  owned 
works  supplying  them  with  water  has,  in  fact,  been  a 
most  striking  feature  of  the  past  decade,  and  there  are 
now  only  two  large  cities  (San  Francisco  and  New 
Orleans)  which  are  supplied  with  water  by  private  com- 

295 


296  MONOPOLIES  AND    THE  PEOPLE. 

panics.  Further,  the  administration  of  water  supply 
systems  by  municipalities  has  been  proved  a  complete 
success.  While  it  would  be  easy  to  cite  individual  cases 
of  mismanagement  or  corruption  in  connection  with 
either  municipal  or  private  works,  the  writer  is  certain 
that  the  standard  of  administration  in  city-owned  water- 
works in  the  United  States  averages  considerably  higher 
than  in  water-works  owned  by  companies. 

GAS-WORKS. — No  progress  has  been  made  during  the 
decade  toward  the  municipal  ownership  of  gas-works,  in 
fact,  the  only  great  municipal  gas-works  in  the  United 
States,  that  of  Philadelphia,  was  leased  to  a  private  com- 
pany in  1898.  It  should  be  noted,  however,  that  the 
lease  was  made  by  the  city  officials,  and  was  not  sub- 
mitted to  popular  vote.  Further,  there  is  good  reason 
to  believe  that  one  reason  why  the  lease  was  effected  was 
that  the  powerful  business  interests  which  control  the 
gas  supplies  of  the  country  were  very  desirous  that  Phila- 
delphia's municipal  gas  supply  should  no  longer  present 
an  example  which  other  cities  might  decide  to  follow. 
To  bring  this  about  they  pursued  the  deliberate  plan  of 
wrecking  the  works,  that  is  using  political  influence  to 
prevent  the  works  from  being  kept  in  repair  and  im- 
proved by  the  adoption  of  up-to-date  appliances.  Then 
after  years  of  such  measures  to  discredit  the  municipal 
gas-works  in  the  eyes  of  the  public,  they  carried  through, 
after  herculean  efforts,  a  lease  of  the  works.  Bearing 
these  circumstances  in  mind,  the  reader  who  may  hear  it 
alleged  that  Philadelphia  has  a  better  gas  supply  under 
private  than  under  municipal  management  will  under- 
stand that  such  a  state  of  affairs  is  really  no  argument 
against  municipal  gas  enterprises. 

But  while  there  has  been  no  progress  during  the  dec- 


MUNICIPAL   MONOPOLIES.  297 

ade  toward  municipal  ownership  of  gas-works,  there 
has  been  great  progress  toward  a  more  intelligent  under- 
standing of  the  relations  between  gas  companies  and 
cities.  The  old-time  farce  of  attempting  to  bring  about 
competition  in  the  gas  business  by  granting  a  franchise 
to  a  rival  is  seldom  or  never  heard  of  now.  Instead, 
the  public  has  turned  its  attention  to  means  for  compel- 
ling the  companies  which  supply  gas  for  public  use  and 
private  lighting  to  furnish  good  service  and  at  more 
moderate  prices.  The  last  ten  years  have  seen  an 
enormous  reduction  in  the  rates  charged  for  gas  in  the 
cities  of  the  United  States.  Nevertheless,  the  rates  are 
still  in  almost  every  case  excessive  and  exorbitant,  as  is 
proved  by  the  great  profits  paid  by  gas  companies  all 
over  the  country,  and  also  by  the  very  low  prices  at 
which  gas  is  made  and  sold  in  England. 

ELECTRIC  LIGHT. — Ten  years  ago  electric-lighting 
competition  was  at  its  height.  The  outcome  has  been 
exactly  what  the  writer  then  predicted  :  the  consolida- 
tion of  the  competing  companies.  In  most  cities  the 
electric  lighting  of  a  city  is  either  in  the  hands  of  a 
single  company,  or  if  two  or  more  companies  are  in 
operation  the  territory  is  divided  between  them. 

The  eventual  consolidation  has  been  hastened  by  the 
necessity  of  placing  wires  underground.  In  most  cases 
this  has  been  done  by  the  companies  themselves,  and 
when  once  a  company  has  intrenched  itself  by  under- 
ground wires,  there  is  little  chance  that  a  competitor 
will  take  the  field  against  it,  or  that  it  would  be  granted 
permission  to  dig  up  the  pavements  to  lay  new  conduits 
even  if  it  desired. 

Again,  in  the  generation  as  well  as  the  distribution  of 
electric  current,  the  necessity  of  making  a  city's  supply 


298  MONOPOLIES  AND    THE  PEOPLE. 

a  monopoly  has  become  evident.  Ten  years  ago,  with 
the  small-size  electric  machinery  and  the  cheap  and 
temporary  overhead  wire  construction  which  was  then  in 
use,  it  was  not  impossible  for  a  man  to  bid  on  a  three- 
year  or  five-year  contract  for  street  lighting  and  build  a 
temporary  plant  to  perform  the  work.  But  all  that  old- 
time  electric  machinery  is  obsolete  now.  The  present 
practice  is  to  generate  the  entire  current  for  a  city's 
supply  in  a  great  power-house  located  where  fuel  and 
water  can  be  most  readily  obtained.  Under  present 
conditions  it  would  be  about  as  reasonable  for  a  city  to 
let  a  yearly  contract  for  its  supply  of  water  as  for  its 
supply  of  electric  light. 

One  of  the  most  remarkable  features  of  municipal  pro- 
gress in  the  past  dozen  years  has  been  the  establishment 
of  municipal  electric  plants,  of  which  a  hundred  or  more 
are  now  in  operation.  They  are  chiefly  in  cities  of 
moderate  size,  Detroit  being  the  largest  example.  In 
most  cases  these  municipal  plants  operate  only  street 
lights  and  those  in  public  buildings;  but  in  a  few  cases 
private  consumers  are  also  supplied.  Of  course,  there 
have  been  some  failures,  as  was  to  be  expected,  but  on 
the  whole  the  municipal  plants  have  been  decidedly  suc- 
cessful, widely  advertised  statements  to  the  contrary  by 
those  interested  in  private  companies  notwithstanding. 

STREET  RAILWAYS. — The  growth  in  public  apprecia- 
tion of  the  value  of  the  street  railway  franchises,  which 
have  been  so  recklessly  given  away  in  the  early  years  of 
American  municipal  growth,  has  been  one  of  the  most 
marked  features  of  the  past  ten  years.  The  idea  that 
competition  could  be  relied  on  to  secure  good  street- 
railway  service  and  to  regulate  the  rates  of  fare  has 
almost  wholly  disappeared.  Nowhere  have  object  les- 


MUNICIPAL  MONOPOLIES.  299 

sons  to  prove  the  truth  that  consolidation  is  sure  to 
follow  active  competition  been  more  numerous  than 
in  the  street-railway  field.  The  tendency  is  all  the 
time  toward  the  consolidation  of  all  the  street  railways 
of  a  city  into  a  single  system  under  control  of  a  single 
corporation.  Besides  this,  consolidation  has  progressed 
in  many  cases  far  beyond  the  boundaries  of  cities  and 
towns,  and  systems  have  been  formed  under  a  single 
ownership  and  control  covering  whole  districts  and 
reaching  dozens  of  adjacent  towns  and  small  cities.  It 
is  noticeable,  moreover,  that  these  consolidations  have 
been  effected  in  almost  every  case  without  public  op- 
position. The  public  has  recognized  that  general 
competition  in  the  street  railway  service  is  practically 
impossible  and  has  acquiesced  in  the  change.  It 
has  also  been  made  plain,  that  to  give  proper  transit 
facilities  to  a  city  or  a  district,  the  system  should  be 
definitely  planned  as  a  single  whole  to  reach  all  parts 
that  need  and  can  support  lines  of  transit,  and  that  the 
whole  network  should  then  be  placed  under  a  single 
management. 

It  is  a  noteworthy  fact  that  coincident  with  the  progress 
of  consolidation  and  the  disappearance  of  competition 
there  has  come  a  vast  improvement  in  the  character  of 
street-railway  service.  The  electric  car  of  1899  is  a 
far  different  vehicle  from  the  horse-car  of  1889.  The 
street-railway  passenger  of  the  present  day  is  carried  far 
more  comfortably  and  swiftly  and  over  a  longer  distance 
than  he  was  in  1889.  Certainly  competition,  save  in 
isolated  instances,  has  had  no  part  in  bringing  about  this 
change.  It  is  to  be  ascribed  first  to  the  introduction  of 
mechanical  traction  in  place  of  horses  and  to  the  great 
growth  in  the  volume  of  traffic.  These  two  changes 


3<X>  MONOPOLIES  AND    THE  PEOPLE. 

have  so  greatly  increased  the  income  and  reduced  the 
expenses  as  to  make  possible  vastly  better  service  to  the 
public  for  the  same  total  expenditure.  The  second 
cause  has  been  the  recognition  of  the  fact  by  street-rail- 
way managers  that  to  give  the  public  good  service  in- 
creases patronage  and  thus  the  profits  of  the  roads. 
Besides  this,  too,  there  has  been  the  desire  to  stand  well 
in  the  opinion  of  the  public.  It  has  been  recognized  to 
a  greater  or  less  extent  that  the  monopoly  which  the 
street  railways  enjoy  is  really  dependent  upon  the  public 
favor,  and  that  it  is  bad  policy  to  arouse  public  enmity 
by  exorbitant  rates  of  fare  or  by  giving  poor  service. 

But  after  all  credit  has  been  given  for  the  progress 
which  the  street-railway  companies  have  made,  it  must 
be  said  also  that  in  most  of  the  larger  American  cities 
the  rates  charged  for  street-railway  service  are  higher 
than  they  should  be.  Detroit  and  Toronto  are  about  the 
only  two  American  cities  which  have  attacked  and  solved 
their  street-railway  problem  in  a  sensible  and  scientific 
manner.  In  almost  every  other  city  radical  changes 
must  take  place  before  the  street-railway  service  will  be 
placed  on  a  basis  that  shall  be  at  once  fair  to  the  public 
and  just  to  the  capital  actually  invested. 

FOREIGN  PRACTICE  IN  TREATING  MUNICIPAL  MON- 
OPOLIES.— Every  student  of  modern  economic  problems 
is  aware  that  the  cities  of  the  old  world  are  as  a  rule  far 
in  advance  of  American  cities  in  both  the  theory  and 
practice  of  handling  municipal  monopolies.  In  some 
cities  of  the  United  States,  an  idea  has  been  more  or 
less  current  that  the  franchises  for  the  use  of  the  city's 
streets  were  the  legitimate  possession  of  the  first  promo- 
ter who  asked  for  them.  This  policy  has  certainly 
resulted  in  promoting  a  mushroom  growth;  but  it  has 


MUNICIPAL  MONOPOLIES.  301 

entailed  burdens  on  this  and  succeeding  generations 
which  are  now  beginning  to  be  fully  recognized.  No 
such  fallacy  regarding  a  city's  rights  and  powers  has  ever 
obtained  currency  abroad.  From  the  first,  cities'  streets 
have  been  regarded  as  public  property.  It  has  always 
been  recognized  as  the  city's  duty  to  provide  water 
supply,  sewerage  systems,  garbage-disposal  systems,  pub- 
lic-lighting systems,  and  systems  of  street  transporta- 
tion. This  it  may  do  either  on  its  own  behalf,  or  by 
leasing  the  privilege  to  a  private  corporation  for  a 
limited  period  and  under  definite  conditions  as  to  the 
service  to  be  furnished  and  the  rates  to  be  charged. 

In  English  cities,  for  example,  the  water  supply  is 
almost  invariably  a  municipal  function,  the  only  notable 
exception  being  London,  which  is  still  supplied  by  a 
number  of  private  water  companies.  Sewerage  and 
garbage-disposal  systems  are  invariably  owned  and 
operated  by  the  cities.  Gas  supplies  are  almost  equally 
divided  between  private  companies  and  municipalities, 
and  it  is  noteworthy  that  the  low  prices  and  excellent 
service  of  the  municipal  plants  establish  a  standard  to 
which  the  private  companies  have  closely  to  adhere. 
Such  exorbitant  rates  for  gas  as  many  American  cities 
are  still  paying  are  unknown  in  England.  Electric  light- 
ing has  been  developed  much  less  generally  than  in  the 
United  States,  partly  because  of  the  excellent  and  low- 
priced  gas  supplies,  but  municipal  electric  plants  are 
numerous  and  rapidly  increasing. 

In  street-railway  service  England  has  many  examples 
of  lines  owned  and  operated  by  municipalities;  and 
where  franchises  have  been  granted  to  private  com- 
panies, the  grant  has  been  such  as  to  insure  to  the  public 
excellent  service  at  low  rates. 


302  MONOPOLIES  AND    THE  PEOPLE. 

Perhaps  the  most  notable  thing  in  English  municipal 
affairs,  however,  is  the  policy  which  has  been  adopted  of 
recovering  for  the  benefit  of  the  cities  franchises  which 
have  been  granted  to  private  corporations.  England, 
like  the  United  States,  is  far  wiser  now  with  respect  to 
questions  of  economic  policy  than  she  was  half  a  century, 
or  even  a  decade,  ago.  Many  franchises  have  been 
granted  by  English  cities  to  private  companies  which  it 
is  now  seen  might  better  have  been  reserved  for  the  city 
itself  to  adminster.  To  meet  this  situation,  many  Eng- 
lish cities  have  undertaken  to  buy  out  the  franchise 
holders,  and  where  this  could  not  be  effected  by  amic- 
able agreement,  legal  powers  have  been  given  them  to 
enable  the  city  to  make  a  compulsory  purchase,  taking 
possession  of  the  works  at  an  appraised  valuation.  In 
the  United  States,  similar  action  has  been  taken  in  re- 
spect to  the  city's  acquirement  of  the  works  of  private 
water  companies;  but  in  Great  Britain,  gas  works  and 
street  railways  have  likewise  been  condemned  and  appro- 
priated by  cities. 


V. 
MONOPOLIES   IN  TRADE. 

THE  progress  in  the  development  of  monopolies  in 
trade  during  the  past  decade  has  been  very  great,  and  it 
has  been  accelerated  by  the  growth  of  combinations  in 
the  manufacturing  industries.  There  has  been  a  strong 
tendency  on  the  part  of  many  manufacturers  to  cut  loose 
from  the  wholesale  merchant  as  an  agent  for  the  distribu- 
tion of  their  goods  and  to  deal  direct  with  the  retailer. 
The  wholesale  merchants  have  met  this  by  combining 
for  their  own  protection,  and  have  refused  to  handle  the 
goods  of  any  manufacturer  who  permitted  his  goods  to 
go  direct  to  retailers.  Other  classes  of  manufacturers, 
and  in  some  cases  the  wholesalers,  have  attempted  to 
reach  the  consumer,  and  the  retailers  have  banded 
together  to  protect  themselves  against  such  competition 
by  refusing  to  buy  any  goods  from  any  manufacturer  or 
wholesaler  selling  direct  to  the  consumer. 

The  result  of  these  various  combinations  is  that  the 
small  buyer  is  generally  compelled  to  pay  the  profit  of 
both  wholesaler  and  retailer  on  everything  he  buys. 
The  large  consumer,  however,  has  become  too  powerful 
by  far  for  either  the  retailer  or  the  wholesaler  to  control. 
He  can  almost  invariably  succeed  in  buying  direct  from 
the  manufacturer. 

303 


304  MONOPOLIES  AND    THE  PEOPLE. 

Doubtless  the  most  important  change  in  trade  during 
the  past  decade  is  the  growth  of  the  department  store. 
The  fact  that  great  economies  were  to  be  found  in  con- 
ducting distribution,  as  well  as  production,  upon  the 
largest  scale  has  been  realized  only  during  recent  years. 
These  great  mercantile  establishments  dispense  with  the 
wholesaler  entirely.  They  go  direct  to  the  producer, 
and  are  able  to  buy  in  such  quantities  and  upon  such 
terms  as  to  secure  much  lower  prices  than  any  small 
dealer.  They  are  located  where  the  greatest  number  of 
consumers  can  be  most  effectively  reached.  They  are  so 
organized  that  the  whole  operation  of  buying,  display- 
ing, advertising,  selling,  and  delivering,  is  conducted  at 
a  much  less  expense,  in  proportion  to  the  amount  of 
goods  sold,  than  could  be  possible  in  any  store  of 
moderate  size. 

It  is  small  wonder  that  under  these  conditions  the 
competition  of  the  department  stores  is  the  question 
which  is  agitating  druggists,  booksellers,  grocerymen, 
shoe  dealers,  and  retail  merchants  of  every  class.  Sup- 
posing it  to  be  true  that  the  public  will  get  better  goods 
for  less  money  from  the  department  stores,  is  it  wholly 
for  the  public  benefit  that  tens  of  thousands  of  indepen- 
dent merchants  shall  be  forced  out  of  business,  and  in 
their  place  we  shall  have  a  similar  number  of  employees 
of  various  grades  in  the  service  of  the  corporation  own- 
ing a  great  department  store  ?  There  are  at  least  two 
sides  to  the  question. 

We  have  shown  above  that  the  department  stores  can 
buy  more  cheaply  and  can  reduce  their  expense  account 
for  a  given  volume  of  business  far  below  that  of  the 
ordinary  small  merchant.  They  can  afford,  therefore,  if 
they  choose,  to  sell  as  good  or  better  goods  to  the  con- 


MONOPOLIES  IN   TRADE.  305 

sumer  for  a  smaller  price.  But  do  they  actually  do  this  ? 
In  most  of  the  current  discussions  of  the  department- 
store  question,  it  is  assumed  as  a  matter  of  course  that 
the  savings  which  the  department  store  makes  are  passed 
on  to  the  buyer.  It  is  sagely  said  that  these  stores  are 
a  survival  of  the  fittest,  and  that  so  long  as  they  bring 
producer  and  consumer  closer  together  and  lessen  the 
total  difference  between  what  the  former  receives  and 
what  the  latter  gives,  they  are  public  benefactors. 

But  on  the  other  side  of  the  question  it  is  alleged  that 
the  consumer  has  not  universally  benefited  by  the  change 
to  department  stores.  It  is  said  that  the  prices  are  not 
on  the  whole  lower  than  those  of  other  stores.  Certain 
goods  on  certain  days  are  marked  down  to  fabulously  low 
figures  in  order  to  attract  customers;  but  the  effect  on  the 
total  volume  of  goods  sold  is  small.  The  quality  of  goods 
is  said  to  have  deteriorated.  The  department-store  buyers 
call  for  cheap  and  showy  goods  because  they  sell  rapidly 
at  attractive  prices,  soon  wear  out,  and  make  sale  for 
more.  It  may  be  argued  that  if  these  things  were  true, 
people  would  cease  to  palronize  these  stores;  but  does 
this  necessarily  follow  ?  The  mass  of  people  who  buy  are 
not  very  wise;  they  are  little  competent  to  judge  of  the 
quality  of  goods;  they  are  more  inclined  to  think  of  one 
bargain  than  of  nine  things  bought  at  the  ordinary  price. 
Finally,  when  they  are  assured  day  after  day,  year  in  and 
year  out,  that  A.  B.  &  C.  sell  the  best  goods  on  earth 
for  the  least  money,  they — not  everyone,  but  the  mass  of 
people — come  implicitly  to  believe  it. 

We  have  fairly  presented  two  opposing  views  of  the 
department  store; — what  are  the  real  facts  ?  The  writer's 
opinion  is  that  there  is  truth  in  both  views  of  the  case. 
There  has  been  a  certain  tendency,  undoubtedly,  with 


306  MONOPOLIES  AND    THE  PEOPLE. 

the  growth  of  the  department  stores,  toward  increasing 
the  sale  of  cheap  and  inferior  goods  to  the  detriment  of 
purchasers.  There  has  also  been  a  tendency  to  compete 
by  cut  prices  on  special  articles  rather  than  by  a  general 
lowering  of  prices  on  all  classes  of  goods.  At  the  same 
time,  it  seems  quite  certain  that  the  department  store  has 
not  been  able  to  keep  all  the  profit  which  has  come 
through  its  cheaper  buying  and  cheaper  management, 
but  has  been  obliged,  by  the  competition  of  rival  stores 
especially,  to  turn  a  part  over  to  the  buyer  in  the  shape 
of  reduced  prices. 

The  most  serious  question  of  all  in  connection  with 
the  department  stores  is,  what  is  to  be  their  future.  No 
one  can  doubt  that  they  have  come  to  stay,  and  that  a 
larger  and  larger  proportion  of  the  retail  business  will 
fall  into  their  hands.  Through  arrangements  with  manu- 
facturing trusts  for  the  exclusive  sale  of  their  products  in 
a  given  territory,  they  can  gain  a  still  greater  advantage 
over  their  small  competitors  than  any  which  they  have 
yet  held. 

It  is  plainly  evident  that  the  coming  of  the  department 
store  means  reduction  of  the  number  of  competing  units, 
and  the  fact  that  combination  and  the  stoppage  of  com- 
petition follow  close  on  this  was  pointed  out  by  the 
writer  in  the  first  edition  of  this  book.  Agreements  on 
prices  of  certain  goods  between  different  department 
stores  are  already  common,  and  will  doubtless  tend  to 
become  more  common.  In  the  light  of  recent  progress  in 
the  consolidation  of  great  industries,  there  will  be  nothing 
strange  in  having  all  the  department  stores  of  a  city,  or 
even  of  a  group  of  cities,  consolidated  under  the  owner- 
ship of  a  single  huge  corporation.  Against  such  a  com- 
petitor, the  small  dealer  would  have  little  chance  of 


MONOPOLIES  IN    TRADE.  307 

keeping  his  head  above  water,  especially  as  he  would 
probably  find  many  of  the  avenues  from  which  he  would 
supply  himself  with  goods  cut  off  through  the  power  and 
influence  of  his  giant  rival. 

MONOPOLIES  IN  FINANCIAL  ORGANIZATIONS. — The 
great  modern  industries  of  banking  and  insurance  are 
by  no  means  without  their  combinations  to  restrain  com- 
petition. In  the  spring  of  1899,  the  banks  of  New  York 
City  associated  in  the  Clearing  House  adopted  rules  re- 
quiring a  charge  to  be  made  for  the  collection  of  country 
checks  deposited  by  customers.  With  the  equity  or 
inequity  of  this  charge,  we  shall  not  concern  ourselves. 
The  point  of  interest  is  that  the  concerted  action  of  the 
associated  banks  was  secured,  and  penalties  were  fixed 
for  such  banks  as  did  not  conform  to  the  rules.  The 
bankers'  agreement  was  as  certainly  a  "  combination  in 
restraint  of  competition  "  as  the  wire-nail  combination 
of  1897,  and  is  of  great  interest  as  an  example  of  the 
restraint  of  competition  in  a  field  where  such  combina- 
tions have  been  generally  deemed  impossible. 

In  the  insurance  business,  combinations  have  long 
been  prevalent,  especially  in  the  field  of  fire  insurance. 
Such  combinations  as  life-insurance  companies  have 
effected  have  been  chiefly  agreements  to  avoid  such 
practices  as  paying  exorbitant  commissions  to  agents, 
permitting  agents  to  divide  commissions  with  applicants, 
or  agreements  to  withdraw  entirely  from  certain  fields 
where  legislation  was  deemed  inimical. 

Combinations  among  fire-insurance  companies  have 
been  of  more  importance,  and  it  has  been  generally  con- 
sidered almost  impossible  to  conduct  the  fire-insurance 
business  except  through  the  medium  of  underwriters' 
associations  to  fix  the  rates  upon  risks. 


J08  MONOPOLIES  AND    THE   PEOPLE. 

It  is  noteworthy  that  in  hardly  any  department  of  in- 
dustry has  the  State  undertaken  the  task  of  supervision 
and  of  regulation  by  legislation  to  the  same  extent  that 
it  has  in  the  insurance  business.  It  has  come  to  be 
recognized  that  the  great  life,  fire,  and  marine-insur- 
ance companies  are  performing  what  is  essentially  a 
public  service.  Their  earnings  are  not  to  be  disposed 
of  at  the  pleasure  of  the  company's  officers.  They  are 
actually  trust  funds  over  whose  care,  investment,  and 
equitable  distribution,  the  State  maintains  a  watchful 
eye.  Competition  between  these  companies  is  not 
always  fruitful  of  benefit  to  the  public.  Suppose,  for 
example,  that  an  insurance  company  were  to  be  per- 
mitted to  charge  what  rates  it  pleased,  one  rate  to  one 
customer,  another  to  another.  How  easy  it  would  be, 
under  such  conditions,  for  those  connected  with  the 
management  of  the  company  to  insure  their  lives  or  their 
property  for  enormous  sums  at  a  merely  nominal  rate. 
Such  an  act,  however,  would  be  a  distinct  fraud  upon 
every  other  holder  of  the  company's  policies.  Some 
States  even  forbid  an  agent  to  divide  the  commission 
upon  a  policy  with  the  insured,  holding  (and  rightly) 
that  such  an  act  is  an  injustice  to  other  policy  holders, 
just  as  the  giving  of  free  passes  or  preferential  rates  on 
railways  is  now  recognized  to  be  unjust  to  other  patrons 
who  pay  full  rates. 

Perhaps  there  is  no  better  chapter  than  this  under 
which  to  notice  the  monopoly  in  the  gathering  and  sale 
of  news  which  has  grown  up  and  acquired  a  power  and 
influence  that  were  hardly  dreamed  of  when  it  was  first 
projected.  The  Associated  Press  is  a  co-operative  organ- 
ization for  the  gathering  and  sale  of  news.  It  covers 
the  whole  country  and,  to  a  considerable  extent,  foreign 


MONOPOLIES  IN    TRADE.  309 

countries  as  well.  No  single  newspaper,  no  matter  how 
powerful  and  wealthy,  can  cover  anything  like  the  terri- 
tory of  this  organization.  It  is  practically  impossible  to 
start  a  daily  newspaper  except  by  purchasing  the  fran- 
chise of  an  existing  journal. 

We  have  drawn  attention  to  this  monopoly  here  merely 
to  point  out  the  fact  that  it  constitutes  a  monopoly.  In 
fact,  it  has  been  specially  referred  to  in  the  new  Texas 
anti-trust  law,  a  provision  being  included  that  associa- 
tions for  the  collection  and  sale  of  news  must  furnish 
service  to  all  who  desire  it  upon  the  same  terms. 

We  need  not  review  the  field  in  more  detail  to  make 
it  clear  that  in  nearly  all  departments  of  trade  great  pro- 
gress has  been  made  in  the  limitation  of  competition 
during  the  past  decade.  Legislation  and  court  decisions 
have  had  no  restraining  effect.  The  old  adage  that 
"competition  is  the  life  of  trade"  is  everywhere  held 
to  be  a  fallacy,  and  in  every  department  of  trade,  from 
the  greatest  to  the  least,  attention  is  concentrated  more 
and  more  upon  plans  to  restrict  or  suppress  competition. 


VI. 

MONOPOLIES  IN  THE   LABOR   MARKET. 

DURING  the  ten  years  ending  in  1890  steady  progress 
has  been  made  by  labor  organizations  in  almost  every 
branch  of  manufacturing  industry,  in  trade,  in  transpor- 
tation, and  in  mining.  Their  membership  has  been 
increased,  and  what  is  more  important,  the  organizations 
themselves  have  been  improved  and  strengthened  so 
that  their  members  are  more  united  and  earnest  in  their 
support.  Attempts  to  combine  workmen  of  all  trades  in 
a  single  organization  have  been  generally  unsuccessful  ; 
but  the  unions  in  separate  trades  have  flourished  and 
multiplied,  and  co-operative  action  between  them  to 
advance  mutual  ends  has  been  found  practicable. 

Doubtless  the  greatest  gain  which  the  labor  organiza- 
tions have  made  in  the  past  decade,  however,  has  been 
the  position  they  have  won  in  the  public  estimation  and 
the  recognition  which  they  have  secured  from  employers. 
Both  the  public  and  employers  have  come  to  appreciate 
the  fact  that  under  modern  conditions  in  the  labor 
market  there  can  be  no  such  thing  as  a  fair  bargain 
between  employer  and  employees  unless  the  latter  are 
united  in  an  organization.  It  has  also  come  to  be 
understood  that  in  any  industry  in  which  free  competi- 
tion prevails,  the  standard  of  wages  is  fixed  in  the  long 

310 


MONOPOLIES  IN    THE  LABOR  MARKET.      311 

run  by  the  most  unscrupulous  employers.  Other  employ- 
ers who  pay  higher  wages  must  in  the  end  lower  them  to 
the  standard  fixed  by  their  competitors  or  find  themselves 
distanced  in  the  race  of  competition. 

These  and  other  similar  facts  have  come  to  be  gener- 
ally understood  by  employers  of  labor  during  the  past 
few  years,  and  the  result  is  that  far  less  opposition  to 
labor  unions  exists  than  was  the  case  a  few  years  ago. 
On  the  other  hand,  the  labor  unions  themselves  have 
gained  some  wisdom  in  the  management  of  their  affairs. 
Their  demands  are  more  moderate  than  was  formerly 
the  case,  since  they  have  found  that  an  attempt  to  force 
wages  too  high  or  make  other  unreasonable  demands  is 
sure  to  react  unfavorably,  even  though  it  prove  tempo- 
rarily successful. 

The  two  greatest  strikes  of  the  past  decade  were  the 
great  railway  strike  of  1894  in  the  United  States  and  the 
engineers'  (or,  in  American  vocabulary,  machinists') 
strike  of  1898  in  Great  Britain.  Each  of  these  great 
strikes  arose  in  the  first  instance  from  causes  compara- 
tively trivial  and  assumed  dimensions  far  beyond  any- 
thing which  its  originators  ever  expected.  In  each  the 
employers  were  successful  in  almost  every  point,  yet  the 
indirect  results  of  each  strike  were  on  the  side  of  the 
wage-worker.  Each  revealed  to  a  nation  some  glimpses 
of  the  vast  and  turbulent  ocean  of  social  unrest  and  dis- 
content which  lies  beneath  the  fair  structure  of  our  civi- 
lization. Each  gave  to  employers  everywhere  a  new 
lesson  of  the  power  of  organized  labor  and  made  them 
less  ready  to  undertake  opposition  to  it.  On  the  other 
hand,  each  of  these  strikes  was  a  new  object-lesson  to 
workers  of  the  great  suffering  which  modern  economic 
warfare  always  entails,  and  a  new  proof  of  the  fact  that 


312  MONOPOLIES  AND    THE  PEOPLE. 

when  any  such  fight  is  fought  to  a  finish  the  capitalist 
can  go  without  profits  longer  than  the  laborer  can  go 
without  bread.  Thus,  to  sum  up,  these  two  great  strikes 
did  nothing  to  injure  the  power  and  influence  of  the 
labor  unions,  but  much  to  foster  their  successful  conduct 
on  principles  of  reason  and  moderation. 

It  should  be  noticed  here  that  one  outcome  of  the 
English  strike  was  a  great  "  employers'  federation," 
which  opposed  to  the  engineers'  organization  an  equally 
united  organization  of  employers.  This  was  an  example 
on  a  large  scale  of  something  which  in  the  United  States 
has  become  quite  common.  It  is  a  frequent  thing  now 
for  trade  associations  to  make  definite  bargains  for  stated 
periods  with  the  representatives  of  the  labor  organiza- 
tions, fixing  wages  and  terms  of  employment  for  a 
stated  time. 

There  is  a  third  party  to  the  monopoly  of  labor  by  the 
labor  unions  of  whom  little  is  heard.  The  employer's 
side  is  familiar  to  the  public,  and  so  is  the  side  of  the 
union  workman  ;  but  little  is  heard  of  the  men  to  whom 
opportunity  to  earn  their  bread  by  the  sweat  of  their 
brow  is  taken  away  by  the  monopoly  of  the  labor  market 
possessed  by  the  union.  Without  at  all  forgetting  the 
side  of  the  labor  unionist,  human  sympathies  must  go 
out  to  the  man  who  in  his  pathetic  search  for  work  to  do 
finds  few  avenues  of  employment  open  to  him  because  of 
the  labor  unions'  monopoly.  Concern  must  be  inspired, 
too,  by  the  limitations  set  by  the  unions  upon  the  num- 
bers of  apprentices,  and  the  prospect  that  with  fewer 
avenues  of  employment  open  to  them,  more  youths  will 
drift  into  careers  of  vice  and  crime.  Until  the  year  1885 
or  thereabouts  there  was  always  a  safety-valve  open  in 
the  United  States  for  the  relief  of  distress  of  this  sort. 


MONOPOLIES  IN    THE  LABOR  MARKET.      313 

The  workman  who  was  crowded  out  everywhere  could, 
as  a  last  resort,  join  the  great  army  which  was  making 
new  homes  on  the  fertile  prairies  of  the  West.  The 
exhaustion  of  the  arable  public  lands,  however,  has 
closed  this  outlet,  and  now  the  only  resource  for  the 
non-union  skilled  mechanic  in  an  industry  in  which  the 
unions  have  control,  is  to  find  work  as  a  common  laborer 
— if  he  can  in  competition  with  the  Italians — or  beg, 
steal,  or  starve. 

A  review  of  the  course  of  labor  organizations  during 
the  past  decade  would  be  incomplete  without  mention 
of  the  increasing  influence  which  these  organizations 
have  exerted  in  the  conduct  of  public  affairs.  It  is  still 
too  common  to  hear  any  man  in  public  life  who  works 
for  legislation  which  is  favored  by  labor  interests,  sneered 
at  as  a  demagogue  who  is  cultivating  the  labor  vote. 
Every  candid  and  intelligent  man  must  acknowledge, 
however,  that  the  country  is  indebted  to  the  influence 
of  the  labor  organizations  for  the  enactment  of  many 
measures  of  great  social  importance  and  benefit.  The 
factory,  mine-inspection,  and  child-labor  laws  may 
be  cited  as  examples.  It  is  true  that  others  joined  in 
promoting  and  framing  this  most  valuable  and  important 
class  of  legislation  ;  but  their  efforts  lacked  the  power 
of  numbers  which  made  the  voice  of  the  labor  organiza- 
tions so  potent.  It  is  true  also  that  some  objectionable 
legislation  has  been  enacted  through  the  influence  of  the 
labor  interests  ;  but  this  is  far  overbalanced  by  the  bene- 
ficial acts  which  they  have  caused  to  be  placed  on  the 
statute  book. 

It  was  common  not  long  ago  to  hear  labor  organiza- 
tions spoken  of  as  a  menace  to  society.  Thoughtful 
men  nowadays  are  coming  to  look  upon  them  as  the 


314  MONOPOLIES  AND    THE  PEOPLE. 

most  potent  and  hopeful  factor  in  the  shaping  and  fur- 
thering of  economic  and  social  and  political  reforms. 
Among  no  other  class  are  these  problems  receiving  more 
earnest  attention.  The  wealthy  and  leisure  class  are,  to 
a  great  extent,  engrossed  in  pleasure  and  are  timid  of 
any  change  which  they  think  may  threaten  their  posses- 
sions. Business  men  as  a  class  are  too  engrossed  in 
making  money  to  give  heed  to  the  study  of  economic 
problems.  We  must  look  to  the  labor  organizations, 
then,  for  the  force  that  shall  sweep  forward  to  success 
any  organized  movement  for  reform,  and,  if  the  measure 
be  one  that  appeals  to  men's  reason  as  a  sound  and 
sober  provision  for  the  common  welfare,  we  will  not  look 
in  vain. 


PART  III. 

EVILS  WROUGHT  BY  RECENT  ECONOMIC 
CHANGES  AND   PRACTICAL   SUGGES- 
TIONS FOR  THEIR  REMEDY. 


315 


I. 

CERTAIN  EVILS  IN  MODERN  INDUSTRIAL  LIFE. 

TEN  years  ago,  after  reviewing  the  progress  which 
had  been  made  toward  the  restriction  or  annihilation  of 
competition  in  all  the  different  classes  of  industry,  the 
writer  discussed  the  evils  of  monopoly,  and  showed  that 
over-production,  the  congestion  of  wealth,  the  increase 
of  poverty,  the  replacement  of  legitimate  enterprise  by 
stock-market  gambling,  and  a  multitude  of  other  social 
and  economic  evils  could  all  be  traced  back  to  the 
growth  of  monopolies. 

At  the  present  day,  however,  these  evils  and  others 
that  follow  in  their  train  are  seen  far  more  plainly. 
They  are  everywhere  the  subject  of  discussion,  and 
every  student  and  worker  for  social  reform  is  searching 
for  remedies.  Besides  all  these,  other  effects  of  the  vast 
revolution  which  has  been  wrought  in  the  organization 
of  industrial  life  are  now  coming  to  light,  and  the  pros- 
pect before  us  is  calculated  to  cause  the  gravest 
forebodings. 

We  look  out  upon  a  world,  at  the  present  day,  in  which 
almost  all  the  production  of  mineral  wealth,  nearly  all 
classes  of  manufacturing  industry,  the  whole  business  of 
transportation  and  communication,  and  a  great  part  of 
the  distribution  of  commodities  through  the  channels 

3i7 


318  MONOPOLIES  AND    THE  PEOPLE. 

of  trade  are  all  removed  from  the  field  of  private  enter- 
prise and  in  the  hands  of  corporations,  for  the  most 
part  of  colossal  size. 

The  whole  world  of  productive  workers,  except  those 
engaged  in  agriculture,  are  the  servants  of  great  corpo- 
rations. We  are  all  workers  for  wages  or  salaries,  high 
and  low  alike.  The  few  small  industries  which  still 
remain  independent  are  too  few  and  unimportant  to 
affect  the  general  truth  of  this  statement.  If  all  men 
were  ideally  perfect,  there  might  be  little  cause  for  com- 
plaint in  this  connection.  It  would  be  a  system  of 
organized  co-operation  designed  to  carry  on  the  world's 
work  in  the  most  efficient  and  economical  manner. 
Human  imperfection,  however,  makes  the  organization 
very  far  from  ideal.  Strict  rules  are  necessary  to 
govern  the  workers  in  every  grade,  and  these  often  bear 
hardly  on  those  whose  independent  spirits  fret  under 
restraint.  Again,  there  must  necessarily  be  men  in  all 
grades  of  authority  ;  but  not  all  men  know  how  to  use 
authority  without  abusing  it.  Browbeating,  abuse,  par- 
tiality, vindictive  persecution, — all  these  things  exist, 
and  men  submit  to  them  rather  than  quarrel  with  their 
bread  and  butter,  or  the  bread  and  butter  of  their 
families. 

There  may  be,  and  probably  is,  no  complete  remedy 
for  evils  of  this  sort ;  but  their  existence  ought  at  least 
to  be  acknowledged.  We  may  then  learn  to  look  with 
some  sympathy  on  Ruskin's  dream  of  a  return  by  the 
world  to  industrial  independence  and  a  simple  and 
primitive  life,  even  while  we  acknowledge  its  impracti- 
cability. We  may  then  learn  to  make  some  allowance 
for  men  who  have  adopted  a  tramp's  life,  or  who  have 
chosen  to  live  by  their  wits  rather  than  endure  the 


EVILS  IN  MODERN  INDUSTRIAL  LIFE.      319 

abuse  of  an  ugly  shop  foreman,  or  who  perhaps  have 
been  compelled  to  some  such  course  by  the  blacklisting 
that  followed  a  single  slip  into  wrong-doing. 

Such  evils  as  those  discussed  in  the  preceding  para- 
graphs are,  to  a  certain  extent,  inseparable  from  modem 
industrial  conditions  ;  but  they  have  been  greatly  ag- 
gravated by  the  growth  of  modern  monopolies.  Legal 
treatises  still  discuss  the  relations  of  master  and  serv- 
ant, and  such  relations  once  existed.  The  apprentice 
or  journeyman  once  ate  at  his  master's  table,  and  the 
two  human  beings  met  on  a  plane  somewhere  near 
equality.  The  modern  factory  system  abolished  that  ; 
yet  in  its  best  forms  the  old-time  relation  was  sometimes 
to  a  certain  extent,  preserved.  There  are  great  indus- 
trial establishments  still  existing,  some  owned  by  private 
firms  and  some  by  corporations,  in  which  men  have 
spent  a  whole  lifetime  in  the  service,  and  in  which  em- 
ployers have  consistently  endeavored  to  deal  justly  and 
generously  with  those  whose  labor  they  hired.  There 
are  a  very  few  notable  cases  in  which  a  great  establish- 
ment, held  as  the  property  of  a  single  owner  or  of  a 
single  family,  has  been  managed  on  broad  humanitarian 
principles  ;  the  mental,  moral,  and  material  condition 
of  the  workers  and  of  their  families  has  been  system- 
atically cared  for,  and  the  property  has  been  managed 
with  as  much  thought  for  the  permanent  welfare  of  those 
to  whom  it  gave  employment  as  for  its  net  profits  as  a 
money-making  enterprise. 

It  need  hardly  be  said  that  such  ideal  conditions  are 
impossible  in  any  business  carried  on  by  a  great  corpor- 
ation. In  any  such  organization  a  broad  and  impassable 
gulf  is  fixed  between  owners  and  employees  ;  and  in 
most  of  the  modern  great  corporate  enterprises  the 


32O  MONOPOLIES  AND    THE  PEOPLE. 

stockholders  as  a  class  know  absolutely  nothing  of  the 
details  of  the  business  of  which  they  are  part  owners. 
The  work  of  running  the  business  is  turned  over  to 
salaried  managers  whose  merits  are  judged  by  their 
ability  to  earn  dividends.  Under  such  conditions  the 
best  that  can  be  hoped  for  is  that  strict  justice  shall 
prevail  in  the  treatment  of  employees.  For  humanity 
and  liberality  there  is  no  room.  No  matter  how  large- 
hearted  a  man  the  manager  may  be,  he  has  no  right  to 
be  generous  with  other  people's  money. 

It  is  not  the  wage-worker  alone  who  suffers  in  the 
modern  transference  of  industry  to  the  control  of  huge 
corporations.  It  is  fraught  with  danger  to  the  whole 
community.  We  have  just  alluded  to  the  small  interest 
which  the  average  stockholder  takes  in  the  conduct  of 
his  property.  There  is  reason  for  this.  It  is  because 
he  has  practically  no  voice  in  its  management.  Our 
great  corporations  are  to-day,  to  a  large  extent,  in  the 
control  of  men  who  have  comparatively  small  pecuniary 
interest  in  the  business  under  their  care.  The  small 
stockholders  in  many  of  the  modern  great  monopolistic 
corporations  have  less  actual  voice  in  their  control  than 
the  voters  in  a  city  have  in  the  conduct  of  its  govern- 
ment. In  theory,  it  is  true,  the  stockholders  elect  the 
directors,  who  are  the  responsible  managers  of  the  en- 
terprise, but  in  practice,  a  minority  stockholder  in  any 
corporation  has  practically  no  voice  in  its  management, 
and  in  any  of  the  modern  corporations  of  enormous 
size  the  small  stockholder  seldom  dreams  of  taking 
any  part  in  the  election  of  officers.  Corporations 
are  managed,  as  is  well  known,  by  the  "  controlling 
interest,"  and  this,  in  many  cases,  represents  a  very 
small  fraction  of  the  actual  property  controlled.  In 


EVILS  IN  MODERN  INDUSTRIAL  LIFE.       $21 

many  corporations  the  real  value  of  the  property  is 
nearly  or  quite  covered  by  bonds  or  preferred  stock  ; 
the  common  stock,  which  carries  with  it  the  manage- 
ment of  the  property,  seldom  or  never  pays  a  dividend 
and  is  hence  never  purchased  by  bona-fide  investors. 
Its  value  lies  only  in  control  of  the  corporation  which  it 
carries,  and  the  opportunities  to  reap  profits  in  stock- 
market  speculations  which  such  stocks  present  to  those 
who  control  and  can  manipulate  their  values. 

For  a  concrete  example  of  the  absolute  divorcement 
of  ownership  from  control,  take  the  great  life-insurance 
companies  with  their  many  hundreds  of  millions  of 
invested  capital.  In  the  case  of  the  so-called  stock  com- 
panies, the  control  is  vested  permanently  in  the  stock- 
holders, the  owners  of  the  $100,000  or  so  of  stock  on 
which  the  company  was  started.  The  dividends  on  this 
stock  are  limited  to  say  six  per  cent.,  all  profits  beyond 
that  amount  are  paid  or  credited  to  the  policy  holders  ; 
but  the  value  of  the  stock  lies  not  in  the  dividends 
which  it  pays,  but  in  the  fact  that  its  control  carries  with 
it  the  entire  management  of  a  business  involving  the 
expenditure  of  millions  of  dollars  annually,  and  the  dis- 
posal of  offices  and  places  more  numerous  and  profitable 
than  those  in  the  service  of  many  states.  In  the  mutual 
life-insurance  companies,  the  policy-holders,  in  theory, 
themselves  select  the  board  of  directors.  In  practice 
they  do  not  and  cannot,  and  the  existing  management, 
through  its  control  of  the  voting  machinery  is  able  to 
perpetuate  itself  indefinitely. 

Banks  are  still  another  example  of  the  divorcement 
of  ownership  from  control.  Many  of  the  great  banks  of 
the  present  day  handle  fifty  dollars  belonging  to  others 
for  every  one  that  is  their  own. 


322  MONOPOLIES  AND    THE   PEOPLE. 

In  the  case  of  both  banks  and  insurance  companies, 
the  fact  that  those  who  control  have  trifling  ownership 
interest  is  so  evident  that  the  State  has  stepped  in  with 
stringent  laws  to  cover  the  responsibility  of  the  man- 
agers of  such  corporations,  and  with  supervision  by 
State  officers  in  addition  to  see  that  the  law  is  obeyed 
in  both  letter  and  spirit. 

Turning  now  to  the  monopolies  in  manufacturing, 
transportation,  and  other  industries,  in  which  these  great 
corporations  which  we  are  discussing  chiefly  exist,  let 
us  follow  more  closely  some  of  the  results  of  the 
divorcement  of  ownership  from  control.  The  first,  and 
one  of  the  most  serious,  is  the  cultivation  of  dishonesty 
in  all  departments  of  industry.  Every  official  of  a  cor- 
poration holds  a  position  of  trust,  and  his  sole  motive  in 
all  his  acts  should  be  the  welfare  of  the  corporation 
which  he  serves.  There  are  officials  who  do  this,  and 
whose  spotless  integrity  and  high  moral  character  are 
proof  against  all  temptation  ;  but  such  men  are  the  ex- 
ception. At  the  other  extreme  are  officials  who  are 
absolutely  without  scruple  as  to  the  use  of  their  position 
to  benefit  their  purse,  and  between  these  two  extremes 
there  are  men  of  all  the  intermediate  grades  of  character. 

The  point  to  be  especially  noted,  however,  is  the  in- 
sidious nature  of  the  temptation  which  the  modern  stock 
market  presents  to  the  officers  of  corporations.  The 
price  of  stocks  will  go  up  and  down  with  the  fluctuations 
of  the  markets  and  the  changing  conditions  of  trade. 
The  managers  can  foresee  many  of  these  fluctuations 
from  their  knowledge  of  the  company's  affairs.  Then 
why  not  use  this  knowledge  for  their  own  profit,  or  at 
least  for  the  profit  qf  their  friends  ?  That  is  the  way 
the  thing  starts  with  many  a  man. 


EVILS  IN  MODERN  INDUSTRIAL  LIFE.       323 

But  some  day  the  stocks  don't  fulfil  the  prophecy. 
They  go  up  when  they  were  expected  to  go  down,  or 
rice  versa  ;  then  comes  the  temptation  to  influence  the 
price  of  the  stock.  A  little  matter  of  bookkeeping  is 
frequently  all  that  is  needed.  No  question  of  injuring 
the  legitimate  stockholders  comes  in.  All  that  is  neces- 
sary is  slightly  to  adjust  figures  of  earnings,  one  way  or 
the  other,  and  the  stock  can  be  made  to  swing  up  or 
down  in  the  market,  vindicate  the  accuracy  of  the  official 
as  a  financial  prophet,  and  save  his  "  margin  "  or  that  of 
his  friend. 

This  applies,  of  course,  chiefly  to  the  "  active  "  stocks, 
those  around  which  the  tide  of  speculation  most  largely 
turns,  and  these  are  frequently  the  non-dividend  paying 
stocks.  Here  the  temptation  to  a  corporation  official  to 
"run  the  company  for  the  stock  market  "  is  well-nigh  irre- 
sistible. Many  times  the  professional  speculators  who 
secures  control  of  some  of  these  low-priced  stocks  do  so- 
for  the  express  purpose  of  using  the  control  for  their 
own  benefit,  and  they  expect  and  require  the  corpora- 
tion officers  whom  they  select  so  to  order  the  affairs  of 
the  company  that  their  speculations  may  be  successful. 

A  volume  might  be  written  of  the  abuses  which  arise 
through  the  misuse  of  their  trust  by  corporation  officials, 
and  of  its  various  ramifications  ;  of  the  letting  of  con- 
tracts "  with  a  string  tied  to  them  "  on  which  some  high 
official  retains  a  hold  ;  of  speculation  in  and  purchase  of 
the  stock  of  other  companies  in  connection  with  con- 
solidation deals  ;  of  the  wrecking  of  valuable  properties 
to  obtain  their  control  at  a  low  figure, — but  of  all  these 
things  only  the  barest  mention  can  be  made  here.  We 
may  only  pause  to  point  out  that  in  the  large  consolida- 
tions which  have  been  formed  in  recent  years  the  tend- 


324  MONOPOLIES  AND    THE  PEOPLE. 

ency  is  more  and  more  towards  an  organization  in  which 
the  individual  stockholder  has  less  voice ;  in  which  the 
value  of  the  property  is  chiefly  in  the  form  of  bonds  or  pre- 
ferred stock,  with  little  or  no  voice  in  its  management ; 
and  the  common  stock,  representing  nothing  but  water, 
will  be  valued  only  for  the  control  it  may  give.  In 
short,  the  modern  trusts,  as  they  are  popularly  called, 
are  organized  in  just  the  form  most  conducive  to  the 
management  of  properties  for  the  stock  market,  and  not 
as  legitimate  businesses.  If  any  reader  doubts  this 
statement,  let  him  reflect  on  the  further  fact  that  many 
of  the  more  notable  trusts,  the  American  Sugar  Refiner- 
ies Co.,  for  example,  make  public  no  statement  whatever 
of  their  operations.  The  influence  which  this  has  had 
upon  the  fluctuations  in  price  of  the  stock  is  well  known. 

And  now  let  us  see  into  whose  control  these  modern 
yapid  changes  are  bringing  the  industry  and  commerce 
whose  perfect  movement  is  so  essential  to  the  public 
welfare.  Manifestly,  the  small  capitalist,  the  working 
man  with  his  hardly  earned  savings,  the  widow  and 
orphan  dependent  on  income  from  small  accumulations, 
— these  all  can  afford  to  make  only  safe  investments 
which  will  earn  some  dividends  or  pay  some  interest, 
even  though  it  be  small.  Only  the  large  capitalist  or  the 
professional  speculator  can  afford  to  buy  or  sell  stocks 
which  represent  nothing  but  wind,  or  stocks  which  may 
pay  great  dividends  now  but  of  whose  position  and  pros- 
pects nothing  can  be  known. 

But  this  is  not  only  a  gross  injustice  ;  it  is  a  most 
alarming  condition.  Is  our  industry  and  commerce, 
then,  on  which  we  so  justly  pride  ourselves,  to  be  turned 
over  to  the  control  of  speculators  and  manipulated  to 
suit  that  side  of  Wall  Street  on  which  those  who  direct 


EVILS  IN  MODERN  INDUSTRIAL    LIFE.       325 

its  affairs  happen  at  the  moment  to  reside  ?  Experience 
has  shown  the  sad  condition  into  which  the  material 
affairs  of  an  enterprise  are  apt  to  fall  when  it  is  run  for 
the  stock  market. 

We  are  continually  assured  with  each  new  consolida- 
tion that  the  price  of  the  product  will  not  be  advanced. 
Oh,  no  !  the  introduction  of  great  economies  subsequent 
upon  the  saving  of  competitive  wastes  will  prevent  all 
that,  and  of  course  such  a  huge  corporation  will  have 
the  most  able  managers  which  money  can  secure. 
Sometimes  this  may  be  true  ;  and  sometimes  the  man- 
agement which  keeps  one  eye  on  the  stock-ticker  finds 
that  it  is  easier  to  increase  earnings  by  raising  prices 
which  the  public  has  to  pay  than  it  is  to  bother  one's 
head  about  petty  economies. 

Still  again,  the  moral  character  of  the  men  in  whose 
control  rests  the  great  industries  of  the  country  is  a  mat- 
ter of  great  moment  to  the  community.  There  is  much 
reason  to  believe  that  the  transfer  of  industries  from 
private  owners  to  great  corporations  has  been  accompa- 
pied  by  a  deterioration  in  the  character  of  the  men  in 
control. 

Time  was  when  railways  all  over  the  country  were 
local  enterprises.  They  were  built  with  local  capital, 
operated  by  men  resident  in  the  locality,  and  managed 
with  the  same  matter-of-fact  honesty  and  business  pru- 
dence as  any  other  enterprise.  The  stock  of  such  cor- 
porations was  a  safe  and  proper  investment  for  people  of 
small  means,  and  many  such  roads  were  built  by  stock 
subscriptions  alone. 

Modern  railway  financiering  has  changed  a]l  that. 
Four  fifths  of  all  railway  stock  pay  no  dividends.  The 
railways  of  the  country  are  no  longer  local  enterprises. 


326  MONOPOLIES  AND    THE  PEOPLE. 

They  are  managed  from  -the  financial  offices  in  New  York 
or  Chicago,  and  all  but  an  insignificant  percentage  of 
their  stocks  are  owned  by  men  of  wealth  who  can  afford 
either  to  lose  or  win  in  the  games  they  play.  Are  these 
men  on  the  average  the  equals  in  moral  character  of 
those  who  held  the  stocks  of  those  little  local  railways  of 
a  half-century  ago  ?  No  one  with  an  intimate  knowledge 
of  life  about  the  great  financial  centres  would  contend 
that  they  are. 

It  is  a  serious  question  whether  all  our  vast  business  of 
manufacturing  is  to  suffer  the  same  transformation  as  the 
railways.  Will  there  be  no  loss  to  the  public  when  these 
hundreds  and  thousands  of  locally  owned  and  locally 
controlled  manufactories  shall  have  their  ownership  and 
control  transferred  to  Wall  Street  ?  There  are  manufac- 
tories which  have  been  kept  going  even  when  profits 
were  nil  that  local  labor  might  be  employed  and  local 
business  interests  protected.  The  trust  cannot  be  ex- 
pected to  undertake  any  such  "  philanthropic  nonsense." 
Profit-sharing  was  much  talked  of  and  tried  on  a  consid- 
erable scale  a  few  years  ago  ;  but  Wall  Street  bulls  and 
bears  are  too  busy  fighting  each  other  to  look  after  any 
such  "  sentimental  experiments."  Some  of  our  great 
manufacturing  industries  have  built  up  cities,  and  the 
surplus  profits  of  those  who  have  created  them  have 
founded  churches,  schools,  hospitals,  colleges,  libraries, 
art  galleries  and  other  things  that  make  life  worth  the 
living.  Are  such  benefactions  likely  to  be  repeated  when 
the  ownership  of  mills  and  factories  is  scattered  among 
a  thousand  wealthy  men,  resident  in  cities  hundreds  of 
miles  distant,  and  the  control  is  in  the  hands  of  a  firm  of 
Wall  Street  brokers  ? 

A  keen  writer,  a   few  years  ago,  declared  that  the  de- 


EVILS  AV  MODERN  IXDUSTRIAL  LIFE.       327 

cadence  of  moral  standards  in  fashionable  society  was 
due  to  the  life  of  idleness  and  pleasure  which  the  modern 
system  of  negotiable  securities  has  made  possible  to  the 
possessor  of  wealth.  Will  not  this  new  revolution  in 
manufacturing  industries  mean  a  further  great  step  in 
this  direction,  the  removal  of  hundreds  of  wealthy  fami- 
lies from  the  smaller  manufacturing  cities  to  the  great 
centres,  the  relinquishment  by  them  of  all  responsibility 
for  the  condition  of  their  workmen  or  that  of  the  city  in 
which  their  mills  are  located  ?  If  it  is  not  true  of  the 
present  generation,  will  it  not  be  true  of  the  next  ? 

There  is  no  point  on  which  the  orthodox  political  econ- 
omist has  been  more  strenuous  than  the  proposition  that 
labor-saving  machinery  benefited  labor.  The  individual 
hardships  that  almost  always  accompany  the  introduction 
of  a  labor-saving  machine  have  been  recognized  ;  but  it 
has  been  insisted  that  the  compensating  benefits  to  labor 
as  a  whole  far  outweighed  these.  "  It  is  true,"  says  the 
orthodox  political  economist, "  that  a  few  men  are  thrown 
out  of  work  by  each  new  labor-saving  machine,  but  on 
the  other  hand  the  cheapening  of  the  cost  of  production 
benefits  the  whole  community  which  buys  the  product. 
Moreover,  this  lowering  of  the  cost  increases  the  demand, 
and  more  men  have  to  be  employed  to  keep  pace  with  it." 

Now,  this  appears  to  be  and  is  sound  reasoning,  pro- 
vided that  the  actual  facts  correspond  with  those  that  are 
assumed.1  With  all  the  great  labor-saving  inventions  of 

1  It  ought  to  be  pointed  out  that  the  increase  of  demand  with  de- 
crease of  price  is  by  no  means  such  a  universal  rule  now  as  it  was  in 
the  days  of  high  prices  and  meager  production,  when  the  orthodox 
political  economy  was  chiefly  established.  Many  staple  products  are 
now  so  cheap  that  all  who  can  afford  to  buy  at  all,  purchase  what 
they  need  regardless  of  such  fluctuations  in  price  as  may  occur. 
Again,  a  great  labor-saving  invention  may  so  affect  the  price  as  to 


328  MONOPOLIES  AND    THE  PEOPLE. 

the  first  three-quarters  of  this  century,  it  was  true.  La- 
bor-saving inventions  did  decrease  the  cost  of  produc- 
tion, to  an  enormous  degree,  and  competition  among 
producers  at  once  transferred  the  benefit  to  the  consum- 
ers. This  decrease  in  the  cost  of  production  has  made 
it  possible  for  the  man  who  works  with  his  hands  at  the 
present  day  to  live  in  comfort  of  which  the  workman  of 
the  last  century  never  dreamed. 

But  now  suppose  one  link  in  the  chain  of  reasoning  of 
the  orthodox  economist  is  broken.  Suppose  that  com- 
petition is  so  stifled  that  when  a  new  labor-saving  machine 
is  installed,  all  the  economy  that  results  goes  into  the 
pocket  of  the  owner ;  there  is  no  lowering  of  the  price, 
no  increase  of  demand.  The  workmen  whom  the 
machine  displaced  may  find  another  job,  if  they  can;  and 
no  new  hands  will  be  taken  on  in  their  place. 

Consider  next  that  the  trust  itself  is  merely  a  great 
labor-saving  machine.  It  proposes  to  and  does  do  away 
with  a  great  mass  of  labor.  We  hear  it  frequently  said 
that  the  trusts  do  not  propose  to  raise  prices  to  consum- 
ers. They  can  make  all  the  money  they  want  by  reduc- 
ing expenses.  But  how  will  they  reduce  expenses  ?  By 
reducing  the  wages  of  the  workmen  ?  This  also  has  been 
strenuously  disclaimed.  By  reducing  the  cost  of  their 
raw  materials?  This  will  seldom  be  possible.  What 
other  conclusion  can  we  reach,  then,  but  that  the  much- 
boasted  reduction  of  expenses  which  the  trust  is  to  effect 
means  simply  cutting  off  a  certain  number  of  employees? 

materially  stimulate  the  demand ;  but  any  ordinary  labor-saving 
invention  has  no  such  immediate  effect.  At  best  it  could  affect  the 
selling  price  less  than  ordinary  market  fluctuations,  and  it  is  a  matter 
of  years  for  people  to  become  familiar  with  a  new  general  lower  level 
of  prices  and  adjust  their  purchases  thereto. 


EVILS  IN  MODERN  INDUSTRIAL  LIFE.       329 

Will  it  be  an  easy  task  for  these  to  find  places  elsewhere 
when  scores  of  other  trusts  have  likewise  set  men  adrift 
in  search  of  employment  ?  Certainly  the  men  who  fare 
thus  will  be  in  no  mood  to  descant  upon  the  beauties  and 
benefits  of  consolidation. 

The  most  pressing  social  problem  at  the  present  day  is 
the  problem  of  the  unemployed.  No  intelligent  observer 
of  life  about  any  of  our  great  cities  can  longer  say  that 
any  honest  and  capable  man  who  wants  work  can  get  it. 
In  busy  times  the  seekers  for  a  job  are  less  numerous 
than  in  dull  times,  but  broadly  speaking,  there  always 
seem  to  be  more  workers  than  work  to  be  done.  There 
appear  to  be  two  main  reasons  for  this  condition  :  the 
first  is  that  already  discussed, — the  influence  of  mon- 
opolies in  restraining  competition,  so  that  the  new  labor- 
saving  machinery  which  they  introduce  throws  men  out 
of  employment  without  causing  reductions  in  the  price  of 
the  product.  The  second  is  the  increasing  proportion 
of  the  annual  wealth  production  which  goes  into  the 
the  hands  of  those  so  wealthy  that  they  do  not  spend  it. 
In  theory,  it  is  true,  this  money  should  be  invested  or  be 
placed  in  the  banks  and  be  loaned  by  them,  so  that 
equal  employment  to  labor  would  result.  In  practice 
there  is  always  some  delay  before  the  stimulus  to  the 
labor  market  can  be  felt,  and  in  dull  times,  when  men 
out  of  work  are  most  numerous,  it  is  generally  noticeable 
that  the  banks  have  a  plethora  of  money,  more  than  they 
can  find  responsible  borrowers  for.  The  congestion 
of  the  wealth  in  the  hands  of  the  multi-millionaires, 
which  is  in  very  many  instances  known  to  be  due  to  the 
operation  of  monopolies,  is  therefore  a  direct  cause 
of  the  lack  of  employment. 

Those  who  have  tried  to  help  the  laborer  to  better  his 


330  MONOPOLIES  AND    THE  PEOPLE. 

condition,  have  always  urged  that  every  honest  and 
frugal  workman  should  strenuously  endeavor  to  own  his 
own  home.  They  have  said  much — but  not  too  much — 
of  the  importance  of  homes  in  bettering  the  moral  and 
social  standards  of  a  community.  Yet  under  modern 
industrial  conditions,  the  man  who  owns  his  own  home, 
outside  the  ranks  of  the  farmers,  has  become  the  rare 
exception.  The  factory  workman  who  can  save  enough 
money  to  buy  a  home  would  be  foolish  to  do  so  when 
the  trust  which  owns  the  mill  in  which  he  works  'may 
at  any  time  shut  it  down,  and  set  him  tramping  in 
search  of  work. 

The  case  is  even  worse  with  those  who  serve  these 
great  modern  corporations  in  higher  capacities.  They 
are  veritable  nomads,  sent  here  and  there  as  the  exigen- 
cies of  business  demand,  living  in  one  town  a  year, 
in  another  six  months,  living  in  hotels,  boarding  houses, 
or  at  best,  in  houses  belonging  to  others.  What  home 
associations  can  cluster  around  a  life  so  spent  ?  How 
can  the  social  and  moral  life  of  communities  be  sound 
and  healthy  and  prosperous,  when  so  large  a  proportion 
of  those  who  should  be  the  most  active  and  influential 
citizens  have  no  local  interest  or  attachments,  and  take  no 
responsibility  for  the  social,  moral,  or  political  welfare 
of  the  place  in  which  they  temporarily  sojourn  ? 

The  direct  money  loss  to  all  classes  of  workers, 
through  being  obliged  to  rent  instead  of  own  their 
homes  is  an  enormous  amount.  Landlords  are  obliged 
to  fix  rents  at  a  figure  which  will  pay  for  the  injury  done 
by  careless  tenants,  the  money  lost  by  dishonest  ones, 
and  the  idle  times  when  tenements  stand  vacant.  This 
taken  in  connection  with  the  tendency  to  place  the  bur- 
den of  taxes  upon  real  estate,  makes  the  rent  the  great- 


EVILS  IN  MODERN  INDUSTRIAL  LIFE.       331 

est  burden  the  working-man  of  high  and  low  degree  has 
to  carry. 

Admittedly,  if  the  workman  was  sure  of  steady  em- 
ployment, the  best  investment  he  could  make  of  his  sur- 
plus earnings,  would  be  to  purchase  a  home.  Under 
actual  conditions,  however,  he  must  put  his  scanty  sav- 
ings where  any  sudden  emergency,  illness,  loss  of 
employment,  or  accident,  will  make  them  immediately 
available.  Here  a  new  condition  confronts  us.  In  old 
times,  savings  banks  paid  their  depositors  four,  five,  and 
even  six  per  cent,  interest.  Under  conditions  of  mod- 
ern life,  three  per  cent,  interest,  or  even  two  and  a  half 
per  cent,  is  probably  the  best  that  can  be  expected  for 
the  savings-bank  depositor  in  the  future. 

"  To  him  that  hath  shall  be  given."  The  man  of 
great  wealth  has  vast  opportunities  to  make  money.  He 
can  invest  his  funds  in  the  most  profitable  enterprises, 
he  can  speculate  and  can  control  the  course  of  his  spec- 
ulation, so  that  the  profits  shall  certainly  come  his  way. 
The  small  investor  must  content  himself  with  the  less 
profitable  properties,  since  he  cannot  afford  to  run  the 
risk  which  large  profits  always  entail,  and  has  not  at  his 
command  the  wealth  with  which  to  compel  success, 
as  has  the  rich  man.  The  working-man,  with  his  few 
hardly  earned  dollars,  has  to  take  the  lowest  position  of 
all,  and  accept  on  them  the  lowest  rate  of  interest  that 
the  market  affords. 

Thus  we  might  continue  to  describe  a  hundred  other 
different  evils  which  have  grown  up  almost  unnoticed  in 
modern  society,  and  to  trace  their  connection  with  the 
growth  of  monopolies  ;  but  space  forbids.  Enough  has 
been  made  clear  to  show  the  serious  nature  of  the  prob- 
lem, and  that  the  deep-seated  social  discontent  and  un- 


332  MONOPOLIES  AND    THE  PEOPLE. 

rest  of  to-day  is  not,  as  we  are  so  often  assured,  mere 
dissatisfaction  with  social  inequalities  that  have  always 
existed.  It  has  its  foundation  in  the  great  economic 
changes  which  the  century  has  brought  forth  and  which 
have  brought  evils  as  well  as  blessings  in  their  train. 

In  concluding  this  chapter,  however,  the  fact  deserves 
to  be  emphasized  that  it  is  the  system  and  not  the  peo- 
ple who  are  at  fault.  Rich  and  poor  are  made  of  the 
same  flesh  and  blood  and  human  nature  ;  and  many  a 
man  who  works  for  a  pittance  would  have  exchanged 
places  with  the  millionaire  against  whom  he  inveighs, 
had  circumstances  been  different.  Denunciation  of  men 
of  wealth  can  accomplish  nothing.  They  are  no  worse 
as  a  class  and  often  far  better  than  the  men  who  denounce 
them.  Our  monopolies  have  come  into  existence  in 
obedience  to  economic  laws  and  have  usurped  powers 
and  extorted  undeserved  profits  only  because  the  Jaws 
permitted  them  to  do  so. 

Great  and  menacing  as  these  evils  are,  we  should  not 
unduly  blame  the  trust  organizers  for  their  existence. 
They  have  not  foreseen  the  evils  which  their  work  would 
bring  to  pass,  and  they  have  done  only  what  the  laws 
permitted  and  what  other  men  in  their  place  would  have 
done. 


IL 


WHAT  SHALL  WE  DO  WITH  MUNICIPAL 
MONOPOLIES  ? 

WE  have  now  reviewed  the  progress  which  has  been 
made  in  the  past  decade  in  the  restraint  of  competition 
in  many  industries  and  the  growth  of  the  evils  which 
this  restraint  is  begetting  in  the  conditions  of  modern 
life.  If  we  turn  our  attention  to  what  is  being  accom- 
plished to  remedy  these  evils  and  to  bring  about  better 
conditions,  we  have  to  record  a  disheartening  lack  of 
progress. 

There  has  been  no  lack  of  legislation.  At  least  twen- 
ty-two States,  besides  the  national  government,  have 
passed  anti-trust  laws  ;  but  their  absolute  futility  as  a 
means  of  preventing  the  suppression  of  competition  and 
the  formation  of  monopolies  has  been  amply  shown  by 
the  hosts  of  trusts  organized  in  1899. 

Yet  to  one  who  keenly  watches  the  changes  in  public 
sentiment,  the  past  decade  has  been  one  of  marvellous 
progress, — not  in  legislative  acts  but  in  the  arousing  of 
public  intelligence  to  the  evils  which  menace  it,  and  to 
the  urgent  need  of  wise  action  to  curb  these  evils.  The 
direction  in  which  the  most  progress  has  been  made  by 
far  is  in  the  field  of  municipal  monopolies.  Here  it  is 
not  too  much  to  say  that  the  battle  for  the  control  of 

333 


334  MONOPOLIES  AND    THE  PEOPLE. 

these  monopolies  by  the  people  is  already  won.  A  fair 
vote  in  almost  any  city  will  show  a  majority  in  favor  of 
municipal  control.  The  value  of  municipal  franchises 
as  now  exploited,  and  the  proposition  that  this  value 
belongs  by  right  to  the  people,  is  no  longer  questioned. 
The  idea  that  city  streets  are  a  proper  field  for  the  exer- 
cise of  competition  has  well-nigh  disappeared.  The 
fact  that  the  supply  of  water,  gas,  and  electric  current  to 
the  inhabitants  of  a  city,  the  provision  for  railway  trans- 
portation in  its  streets  and  the  disposition  of  its  wastes 
are  natural  monopolies  and  must  be  conducted  as  mo- 
nopolies in  any  well-ordered  scheme  of  society,  has  come 
to  be  understood  by  hundreds  of  thousands,  whereas 
only  a  few  advanced  thinkers  comprehended  it  ten  years 
ago. 

The  companies  holding  public  franchises  have  done 
much  to  educate  public  opinion  in  these  matters  by  the 
great  strides  which  they  have  made  in  the  consolidation 
of  competing  interests  and  even  of  interests  not  compet- 
itive. In  most  of  our  large  cities  it  is  already  true  that 
all  the  street-railway  lines  are  in  the  hands  of  a  single 
corporation  ;  all  the  gas-supply  systems  are  in  the  hands 
of  a  single  corporation  ;  all  the  electric-lighting  plants 
are  in  the  hands  of  a  single  corporation.  In  many  of  the 
smaller  cities,  and  in  some  of  the  larger,  both  gas  and 
electric  light  systems  are  under  a  common  ownership, 
and  where  this  is  not  the  case  they  are  frequently  oper- 
ated under  an  agreement  to  refrain  from  competition 
with  each  other. 

These  wide-spread  consolidations  have  taken  the 
ground  from  under  the  feet  of  those  who  so  long  per- 
sisted in  the  claim  that  competition  could  always  regu- 
late prices  and  protect  the  public  even  in  this  field.  No 


MUNICIPAL  MONOPOLIES.  335 

one  cares  to  undertake  competition  with  such  great  and 
powerful  rivals  ;  and  even  if  any  did  come  forward,  the 
public  is  in  no  mood  to  give  away  more  franchises  for 
the  use  of  city  streets  in  the  elusive  hope  of  securing 
free  competition. 

The  adherents  of  the  old  political  economy,  who  once 
argued  that  competition  was  the  panacea  for  all  ills,  have, 
however,  one  more  argument  which  they  put  forward. 
It  is  that  street-railway  companies,  gas  companies,  etc., 
will  keep  down  their  prices  anyway  in  order  to  attract  a 
larger  volume  of  business,  so  that  the  public  will  get  good 
service  at  low  prices,  notwithstanding  the  existence  of  a 
monopoly.  This  is  an  eminently  cheerful  philosophy  ; 
but,  unfortunately,  the  facts  do  not  sustain  it.  The  use 
of  the  public  utilities  in  a  city  is  to  a  great  degree  a 
matter  of  necessity,  not  of  choice.  Thus  the  street  cars 
are  crowded  even  though  the  fare  be  high,  and  gas  com- 
panies swell  the  volume  of  their  output  even  at  rates 
which  are  double  those  charged  in  English  cities.  Un- 
der these  conditions,  the  companies  do  not  reduce  their 
rates  to  increase  profits.  They  reduce  them  under  the 
pressure  of  public  opinion,  or  in  response  to  legislation, 
actual  or  threatened  ;  but  with  possible  isolated  excep- 
tions, they  are  never  reduced  with  the  idea  of  increasing 
profits.  The  same  thing,  it  should  be  said,  is  true  of 
other  monopolies.  A  difference  of  one  half  cent  per  Ib. 
in  the  retail  price  of  sugar,  for  example,  is  too  small  to 
affect  its  consumption  appreciably  ;  yet  such  a  change 
would  affect  the  annual  profits  of  the  Sugar  Trust  by 
many  millions  of  dollars. 

We  are  brought  back,  then,  to  the  question,  how  shall 
the  rates  charged  by  these  municipal  monopolies  be  fixed 
so  as  to  be  at  once  just  to  the  capital  invested  in  them  and 


336  MONOPOLIES  AND    THE  PEOPLE. 

to  the  public  ?  It  is  now  generally  agreed  that  any 
such  monopoly  is  entitled  to  such  earnings  as  will  pay  a 
reasonable  rate  of  interest  upon  the  capital  invested  in 
it,  and  that  if  the  rates  charged  are  such  as  to  bring  the 
earnings  in  excess  of  this,  the  balance  should  be  paid  to 
the  municipality.  Lest  this  should  be  misunderstood, 
it  should  be  said  that  by  a  reasonable  rate  of  interest 
is  meant  such  a  return  as  will  include  beside  the  actual 
interest,  such  compensation  for  the  risks  to  which  the 
investment  may  be  exposed  as  circumstances  may 
justify.1 

Had  this  principle  been  always  understood  and  kept 
in  mind  in  the  original  granting  of  municipal  franchises, 
there  might  now  be  comparatively  satisfactory  relations 
between  cities  and  the  companies  holding  their  fran- 
chises. In  the  granting  of  franchises,  however,  igno- 
rance or  worse  faults  have  generally  been  conspicuous. 
Many  franchises  make  no  stipulation  as  to  the  rates  to 
be  charged ;  others  make  stipulations  so  vague  and 
impossible  of  enforcement  that  they  might  as  well  be 
omitted.  Many  franchises  have  been  granted  in  perpe- 

1  It  is  frequently  said  by  those  who  argue  for  the  side  of  the 
franchise  companies,  that  if  a  street-railway  company,  for  example, 
is  made  to  pay  a  share  of  its  gross  receipts  to  the  city,  a  special  and 
inequitable  tax  is  thereby  laid  on  all  who  use  the  street  cars.  There 
is  some  basis  of  fact  in  this.  It  would  be  unquestionably  more 
equitable  to  reduce  rates  of  fare  than  to  pay  a  large  percentage  of 
the  gross  receipts  to  the  city.  In  practice,  however,  the  rates  of 
fare  cannot  be  so  exactly  adjusted  that  the  capital  invested  shall 
earn  a  fair  income  and  no  more.  Besides  this,  the  city  is  put  to 
direct  expense  in  many  ways  by  the  operation  of  railways  in  the 
streets  for  which  it  is  fair  that  those  who  use  such  railways  should 
pay.  What  should  be  aimed  at,  therefore,  is  such  a  rate  of  fare  as 
will  render  a  fair  return  on  the  capital  invested,  and  a  moderate 
surplus  besides  to  go  to  the  city  treasury. 


MUNICIPAL   MONOPOLIES.  337 

tuity  or  for  terms  so  long  that  the  effect  is  the  same. 
Seldom  has  provision  been  made  for  more  than  a  nominal 
compensation  to  the  city  granting  the  franchise,  and, 
when  made,  it  is  too  often  in  a  form  which  cannot  be 
enforced. 

It  is  quite  conceivable  in  theory  that  a  city  might  turn 
over  to  private  companies  the  management  of  its  water 
supply,  the  operation  of  its  railways,  and  the  distribution 
of  gas  and  electric  current  in  its  streets,  under  condi- 
tions which  would  ensure  to  its  citizens  good  service  at 
prices  as  low  as  a  reasonable  return  on  the  investment 
would  permit;  but  what  city  has  actually  done  this? 
As  a  matter  of  fact,  the  creation  of  municipal  monopo- 
lies under  carelessly  granted  franchises  has  permitted 
private  fortunes  to  be  swelled  by  many  hundreds  of 
millions  of  dollars  of  "  unearned  increment."  It  is  true 
that  the  American  plan  of  giving  away  city  franchises 
broadcast  has  greatly  stimulated  the  introduction  of 
electric-lighting  plants,  electric  railways,  etc.,  but  for 
such  stimulation  the  public  is  now  paying  dearly.  It 
needs  but  the  slightest  knowledge  of  the  capitalization 
and  earnings  of  the  franchise  companies  in  the  principal 
American  cities,  to  perceive  that  the  public  is  being  de- 
liberately exploited  for  the  benefit  of  these  corporations. 

But  this  is  not  the  whole  story  by  any  means.  It  is  a 
fact  that  out  of  the  relations  between  city  governments 
and  franchise  companies  have  grown  three  quarters  of 
the  municipal  corruption  of  the  past  two  decades.  It  is 
often  said  that  city  governments  are  too  ignorant  and 
too  corrupt  to  carry  on  such  industries  as  the  supply  of 
gas  or  electric  light  or  the  operation  of  street  railways. 
But  if  this  be  true,  it  is  even  more  true,  and  is  proved 
by  experience,  that  city  officials  are  too  ignorant  and  too 


338  MONOPOLIES  AND    THE  PEOPLE. 

corrupt  to  deal  successfully  with  franchise  corporations. 
They  have  granted  franchises  which  have  failed  in 
almost  every  point  to  protect  the  interests  of  the  public. 
They  have  failed  to  enforce  such  requirements  as  the 
franchises  did  contain  in  the  interest  of  the  people,  and 
on  the  other  hand,  they  have  perverted  such  powers  as 
the  franchises  did  grant  and  made  them  a  means  of 
levying  blackmail  upon  the  corporations. 

The  charge  is  frequently  made  that  this  or  that  city 
government  is  controlled  by  the  gas  companies  or  the 
street-railway  companies.  It  is  common  knowledge 
that  corporations  of  this  sort  are  a  dominating  power  in 
municipal  politics  almost  everywhere.  The  reason  for 
this  is  not  far  to  seek.  These  corporations  are  fre- 
quently compelled  to  be  in  politics  to  protect  themselves 
from  blackmail.  Is  it  strange  that  they  should  use  their 
power  when  once  they  have  gained  it  for  more  than 
mere  protection  from  injustice  ?  It  costs  money  to  run 
a  political  machine,  and  when  a  corporation  undertakes 
to  operate  one,  it  naturally  tries  to  make  enough  addi- 
tional profits  to  pay  at  least  the  cost  of  operation. 

It  is  strange  how  little  has  been  said  upon  this  aspect 
of  the  great  question  of  municipal  control  versus  muni- 
cipal ownership  and  operation  of  the  so-called  public 
utilities.  The  argument  that  city  governments  are  too 
corrupt  and  inefficient  to  carry  on  business  is  heard 
every  day  ;  but  nothing  is  ever  heard  of  the  fact  that  it 
is  easier  for  a  dishonest  city  official  to  make  corrupt 
profits  through  connection  with  a  franchise  company 
than  from  gas-works  or  a  water-supply  system  operated 
by  the  city. 

It  is  probably  true  that  a  city  will  often  pay  higher 
wages  and  work  its  employees  shorter  hours  than  a 


MUNICIPAL  MONOPOLIES.  339 

private  corporation  ;  but  will  the  voters  regard  this  as  an 
argument  against  municipal  ownership  ?  On  the  other 
hand,  a  city  often  obtains  its  supplies  at  prices  as  low 
as  or  lower  than  private  companies.  We  hear  much  of 
the  corruption  of  city  officials  in  the  letting  of  contracts, 
but  if  the  secrets  of  all  hearts  were  revealed,  it  is  likely 
that  every  such  case  could  be  matched  by  an  instance 
where  an  officer  of  a  private  company  has  been  guilty  of 
the  same  thing.  City  officers  are  generally  compelled 
by  law  to  publicly  advertise  the  letting  of  contracts.  It 
is  extremely  rare  for  private  companies  to  do  this.  Acts 
of  public  officials  are  always  likely  to  be  subjected  to 
scrutiny  and  investigation,  but  managers  of  a  private 
corporation  can  cover  up  dishonest  acts  in  a  hundred 
ways  and  the  stockholders  never  find  them  out. 

It  is  true  that  city  governments  are  too  often  corrupt 
and  inefficient ;  but  so  are  private  corporations.  City 
officers  appoint  their  relatives  to  desirable  positions  ; 
but  so  do  the  officers  of  private  companies.  Cities  put 
incompetent  men  into  responsible  positions  ;  but  so  do 
private  companies.  Those  who  argue  against  municipal 
ownership  on  account  of  the  corruption  of  city  govern- 
ments have  assumed  that  private  management  of  munic- 
ipal monopolies  was  honest  and  efficient  ;  but  this  is  far 
from  being  the  case  as  a  universal  rule.  There  are,  of 
course,  companies,  as  there  are  cities,  whose  affairs  are 
managed  honestly  and  ably,  but  there  is  no  evidence 
that  such  management  is  more  common  in  the  one  case 
than  in  the  other. 

This  will  doubtless  seem  a  very  strange  statement  to 
most  people  ;  for  cases  of  corruption  and  dishonesty  in 
municipal  officers  are  often  made  public,  while  it  is 
seldom  that  we  hear  of  similar  acts  by  officers  of  private 


340  MONOPOLIES  AND    THE  PEOPLE. 

corporations.  It  must  be  remembered,  however,  that 
there  are  a  dozen  chances  for  the  exposure  of  dishonesty 
on  the  part  of  a  public  official  to  one  chance  in  the  case 
of  a  dishonest  officer  of  a  private  company.  By  dis- 
honesty we  mean,  of  course,  not  actual  purloining  from 
the  treasury,  but  the  indirect  profits  which  are  so  com- 
mon in  some  corporations  that  they  are  considered  a 
fair  perquisite  of  the  managing  officers  and  are  not 
looked  upon  as  dishonest  at  all. 

Much  might  be  said  of  the  specific  ways  in  which 
those  in  control  of  the  affairs  of  private  corporations 
manage  to  grow  wealthy  from  other  sources  than  their 
salaries  ;  but  we  must  turn  to  a  comparison  of  muni- 
cipal and  private  management  in  point  of  efficiency.  It 
is  easy,  of  course,  to  point  to  magnificent  enterprises 
carried  out  in  an  admirable  manner  by  private  corpor- 
ations ;  and  to  instances  of  bungling  by  incompetent 
officials,  appointed  through  the  strength  of  political 
pulls,  in  municipal  works  ;  but  this  is  only  one  side  of 
the  picture.  It  is  equally  easy  to  point  out  cities  whose 
public  works  are  models  of  sound  and  able  engineering 
practice,  and  to  point  out  private  companies  whose 
cheap  and  poor  work  has  been  an  injury  to  the  cities 
where  they  have  operated.  We  need  only  instance  a 
large  part  of  the  work  done  by  the  promoters  who  have 
built  street  railways,  water-works,  etc.,  in  the  smaller 
cities.  Franchises  have  been  secured  and  the  plant  has 
been  built  with  the  largest  nominal  outlay  and  the  least 
actual  expenditure  possible.  Bonds  have  then  been 
floated  to  cover  all  the  plant  has  cost  according  to  the 
books  and  something  besides.  The  promoters  have  then 
disposed  of  their  whole  interest  in  the  enterprise,  getting 
•back  all  it  has  cost  them  and  a  handsome  profit  besides, 


MUNICIPAL  MONOPOLIES.  341 

and  they  have  left  to  some  one  else  the  task  of  operating 
the  plant  they  have  built.  By  and  by  defects  in  the 
original  construction  come  to  light  and  the  plant  has  to 
be  largely  rebuilt,  these  added  expenditures  going  to 
swell  the  capitalization.  Then  when  the  public  com- 
plain that  rates  are  too  high,  they  are  told  that  the  earn- 
ings are  no  more  than  sufficient  to  pay  interest  on  the 
capital  invested. 

It  is  this  subject  of  over-capitalization  around  which 
most  of  the  difficulties  arise  in  connection  with  the  re- 
adjustment of  relations  between  municipal  monopolies 
and  the  people.  Many  cities  stand  ready  to  purchase 
the  water-works  or  street-railway  lines  within  their 
limits  at  the  fair  value  of  the  plant ;  but  to  pay  millions 
of  dollars  besides  for  the  franchise  right  is  something 
against  which  the  taxpayers  protest. 

The  side  of  the  people  of  the  city  may  be  stated  about 
as  follows  : 

Years  ago  the  then  responsible  officers  of  this  city  gave  you  the 
privilege  of  distributing  gas  (let  us  say,  for  example)  in  our  streets. 
They  were  ignorant,  or  worse,  and  they  gave  you  this  right  with  no 
limit  as  to  what  you  should  charge,  no  requirement  as  to  the  quality 
of  gas  you  should  furnish,  no  limit  to  the  duration  of  the  right. 
You  had  a  legal  right  under  this  franchise  to  make  all  you  could  out 
of  us,  and  you  have  done  it.  Your  earnings  have  not  only  paid  all 
your  expenses  and  a  fair  income  on  the  money  actually  and  honestly 
invested  in  your  plant,  but  a  large  sum  in  addition.  It  is  this  sur- 
plus of  earnings  (to  which  you  never  had  any  moral  right,  though 
you  secured  a  legal  one)  that  you  claim  represents  the  annual  earn- 
ing power  of  your  franchise.  You  say  to  us  that  if  we  buy  your 
plant  and  pay  you  what  it  is  worth,  we  must  at  the  same  time  buy 
your  franchise  ;  that  is,  pay  you  a  sum  so  great  that  its  interest  will 
amount  to  as  much  as  these  surplus  earnings  every  year.  Nor  are 
you  even  content  with  that.  You  demand  that  we  take  into  account 
the  increase  of  business  which  will  come  to  you  as  the  years  go  by 


342  MONOPOLIES  AND    THE  PEOPLE. 

if  you  were  to  retain  possession  of  this  franchise,  and  pay  you  for  all 
of  these  surplus  earnings  which  you  might  have  made. 

Such  is  the  demand  which  you  have  the  effrontery  to  make,  and 
with  which  we  emphatically  refuse  to  comply.  We  will  let  bygones 
be  bygones.  We  will  say  nothing  about  the  sums  which  you  have 
taken  from  us  in  the  past  in  excess  of  what  was  fair  and  just ;  but 
we  deny  your  right  to  take  them  from  us  in  the  future  or  to  exact 
millions  from  us  for  consenting  to  forego  that  privilege.  You  have 
for  years  exercised  rights  which  you  ought  never  to  have  received 
and  which  an  honest  and  enlightened  city  government  would  never 
have  granted  to  you.  We  are  wiser  to-day  ;  and  we  deny  that  the 
act  of  a  single  set  of  men,  no  matter  with  what  powers  they  may  be 
clothed,  can  be  made  to  bind  all  succeeding  generations  against 
their  will. 

Such  is  the  statement  which  we  may  imagine  the  tax- 
payers of  a  city  making  to  a  corporation  whose  franchise 
they  desire  to  secure  ;  and  now  let  us  see  what  reply  we 
can  hear  from  the  other  side.  If  they  desire  to  present 
the  really  strong  elements  in  their  case,  we  might  hear 
.something  like  this  from  the  corporation's  stockholders: 

We  appreciate  your  position,  but  consider  our  case.  The  men 
who  obtained  this  franchise  for  a  song  are  gone  with  those  who  sold 
it..  We,  like  you,  have  been  ignorant.  We  bought  these  stocks 
and  these  bonds,  lawfully  issued,  and  we  did  so  in  the  full  belief 
that  their  value  would  remain  unimpaired.  The  constitution  under 
which  we  live  declares  as  one  of  its  foundation  principles  that  no 
man  shall  be  deprived  of  his  property  without  being  entitled  to 
equivalent  compensation.  A  part  of  this  property  consists  in  tan- 
gible things,  another  part  consists  in  the  right  to  charge  you  a  price 
which  will  yield  a  profit.  If  you  deprive  us  of  this  our  property, 
you  must  pay  us  for  the  one  part  as  well  as  the  other. 

Evidently  the  company  has  the  stronger  case  accord- 
ing to  statute  law  ;  as  evidently  the  people  have  the 
stronger  case  when  viewed  in  the  light  of  those  great 
principles  of  justice  and  equity  which  lie  at  the  base  of 
all  law. 


MUNICIPAL  MONOPOLIES.  343 

The  practical  lesson  from  the  discussion  is  plain. 
The  first  step  of  all,  if  a  city  desires  to  reacquire  those 
franchise  rights  with  which  it  has  mistakenly  parted,  is 
to  reduce  the  value  of  the  franchise.  Compel  the  com- 
pany to  reduce  its  rates  to  such  a  point  that  it  will 
receive  no  more  than  a  fair  income  on  the  actual  value 
of  its  property.  To  attempt  to  purchase  franchises  at 
the  swollen  value  they  have  attained  because  of  the 
abuse  of  the  privileges  carelessly  or  corruptly  granted 
by  a  past  generation  is  to  place  enormous  and  unde- 
served burdens  upon  the  taxpayers. 

It  will  be  said,  I  presume,  that  this  is  contrary  to  legal 
precedent,  that  according  to  the  famous  Dartmouth 
College  decision,  contracts  made  by  a  corporation  are 
placed  within  that  section  of  the  Constitution  prohibit- 
ing even  Congress  from  making  any  law  annulling  the 
obligations  of  contracts.  A  city,  in  the  eyes  of  the  law, 
is  a  corporation,  and  its  Board  of  Aldermen,  even  though 
its  members  be  both  ignorant  and  dishonest,  can  make 
contracts  with  an  irresponsible  promoter  by  which  all 
succeeding  generations  shall  be  irrevocably  bound  !  To 
such  a  reductio  ad  absurdum  does  this  court  decision 
of  a  past  generation  bring  us  !  Is  it  not  time  that  our 
law-makers  and  law  interpreters  awoke  to  the  fact  that 
legal  and  economic  principles  which  were  sound  and 
true  when  they  were  enunciated  in  the  days  of  free  com- 
petition may,  under  the  industrial  conditions  of  the 
present  day,  work  enormous  hardship  and  injustice  ? 

We  hear  much  ado  in  these  days  about  the  rights  of 
property.  Whenever  a  city  attempts  to  acquire  a  fran- 
chise, much  is  said  about  the  sacred  rights  of  its  owners. 
Let  us  analyze  these  property  rights  a  little.  There  is 
no  question  as  to  the  tangible  property.  The  city  is 


344  MONOPOLIES  AND    THE  PEOPLE. 

willing  to  pay  for  that  its  fair  cash  value  ;  but  it  is  urged 
that  the  right  to  earn  profits  in  excess  of  a  fair  interest 
on  the  cash  value  of  the  plant  is  also  property  !  Take, 
for  example,  a  water-supply  system  whose  acquirement 
by  a  city  is  under  consideration.  Its  owners  say,  "  We 
are  making  $25,000  a  year  above  our  operating  expenses 
and  interest  upon  our  investment,  and  the  right  to  make 
this  profit  and  to  increase  it  year  by  year  with  the  growth 
of  the  city  is  our  property,  which  you  must  pay  for." 
To  the  valiant  defender  of  the  "  rights  of  property  "  this 
seems  to  conclusively  settle  the  matter.  He  totally  for- 
gets that  there  are  other  property  rights  exactly  as  sacred 
as  the  rights  of  the  holders  of  stocks  and  bonds.  This 
$25,000  a  year  which  the  water  company  expects  to 
make  is  property,  too,  just  as  sacred  as  any  other  prop- 
erty. Why  should  those  who  own  it  be  compelled  to 
give  it  up  to  the  water  company  ?  Is  not  property  in 
the  hands  of  the  thousands  just  as  sacred  as  in  the  hands 
of  the  tens  ? 

The  whole  question  simmers  down  to  this  :  A  munici- 
pal monopoly  has  no  legal  right — and  I  say  legal  right 
intentionally,  meaning  thereby  the  interpretation  given 
to  that  great  body  of  combined  precedent  and  sound 
reasoning  which  we  term  the  common  law — to  charge 
anyone  more  for  its  service  than  the  amount  which  will 
pay  in  addition  to  the  entire  cost  of  operation  a  fair  rate  of 
interest  on  the  capital  invested,  the  risks,  of  course,  being 
taken  into  consideration.  The  reason  for  the  swollen 
values  of  the  franchises  and  the  enormous  profits  of  our 
modern  municipal  monopolies  is  that  they  are  wholly 
disregarding  this  rule  and  are  charging  "what  the  traffic 
will  bear."  Bring  rates  down  to  an  equitable  basis  and 
the  value  of  the  franchise  proper  practically  disappears. 


MUNICIPAL   MONOPOLIES.  345 

It  is  true  that  this  would  bear  hardly  on  some  of  those 
who  have  invested  in  the  stocks  of  these  municipal 
monopolies  in  the  honest  belief  that  the  companies  had 
a  legal  and  moral  right  to  "  charge  what  the  traffic  will 
bear"  ;  but  it  would  be  not  one  tenth  as  hard  upon  them 
as  present  conditions  are  upon  the  people  who  are  com- 
pelled to  pay  exorbitant  prices  for  gas,  street-car  service, 
water  supply,  and  other  necessities  of  city  life. 

It  will  be  apparent  from  the  preceding  discussion  that 
the  author  is  in  hearty  sympathy  with  the  present  strong 
movement,  world-wide  in  its  extent,  toward  the  munici- 
pal ownership  and  operation  of  what  he  has  termed 
municipal  monopolies.  Yet  he  is  no  stickler  for  this  as 
a  panacea  for  all  ills,  or  as  the  only  mode  of  securing 
efficient  and  economical  public  service.  It  is  entirely 
possible  to  secure  good  results  by  municipal  ownership 
of  a  plant  which  is  leased  for  operation  to  a  private 
company  ;  or  even  by  granting  a  franchise  permitting  a 
company  to  construct,  own,  and  operate  works.  Local 
circumstances  may  make  any  of  these  three  alternatives 
preferable.  Incompetent  and  dishonest  municipal  officials 
can  bring  grievous  burdens  upon  the  people  under  any 
of  these  systems,  and  able  and  upright  officials  can  reduce 
these  burdens  to  their  lowest  limits.  Nevertheless, 
experience  does  show  that  municipal  ownership  brings 
on  the  whole  the  best  results  to  the  people  at  the  least 
cost,  and  the  movement  in  this  direction  is  therefore 
deserving  of  earnest  support. 

The  author  takes  this  position  with  the  most  thorough 
realization  of  all  the  defects  of  city  government  and  the 
difficulties  in  the  way  of  bettering  it.  He  is  familiar  with 
every  aspect  of  this  argument  against  municipal  owner- 
ship, and  he  favors  it,  notwithstanding  this  argument  be- 


346  MONOPOLIES  AND    THE  PEOPLE. 

cause  he  has  become  convinced  that  municipal  ownership 
will  tend  toward  the  improvement  rather  than  the  injury 
of  municipal  government. 

We  cannot  turn  the  wheel  of  human  progress  back- 
ward. "  That  government  is  best  which  governs  least," 
was  enunciated  in  a  different  world  from  that  in  which 
we  live  to-day.  The  force  of  events  compels  cities  and 
States  to  concern  themselves  with  industry  to  a  greater 
and  greater  degree,  whether  they  will  or  not.  We  have 
tried  the  plan  of  farming  out  municipal  monopolies 
to  private  companies,  and  the  result  has  been  in  too 
many  cases  corruption  of  municipal  government,  inef- 
ficient service,  and  charges  to  the  people  enormously 
exorbitant.  Municipal  ownership,  with  all  the  defects 
and  failures  which  will  undoubtedly  accompany  it,  can- 
not make  conditions  worse  than  at  present.  The  experi- 
ence already  accumulated  indicates  that  it  can  make 
them  better.  For  these  reasons,  then,  the  movement 
toward  municipal  ownership  rests  on  a  sound  basis,  and 
deserves  the  cordial  support  of  every  friend  of  social 
progress. 


III. 

WHAT  SHALL  WE  DO  WITH    THE  TRUSTS? 

THE  greatest  and  most  difficult  questions  which  con- 
front the  people  of  the  civilized  world  at  the  present  day 
are  those  which  arise  from  the  absolute  control  of  the 
chief  processes  of  production  which  has  been  secured  by 
those  great  aggregations  of  capital  which  are  commonly 
called  Trusts.  The  people  have  witnessed  the  death  of 
competition  in  municipal  service,  in  the  railway  field, 
and  in  other  departments  of  industry  ;  but  never  with 
the  same  fear  as  now,  when  they  behold  its  extinction  in 
the  great  manufacturing  industries.  The  question,  what 
means  shall  we  take  for  protection  from  the  extortion  of 
these  monopolies  is  heard  on  every  hand,  and  thus  far 
no  answer  has  been  given  that  has  not  been  at  once 
shown  to  be  weak  and  puerile. 

It  is  frequently  said,  for  example,  that  these  great  ag- 
gregations are  only  temporary  affairs.  "  They  will  soon 
go  to  pieces  again."  Such  a  statement  betrays,  of 
course,  entire  ignorance  of  the  constitution  of  those 
modern  trusts.  The  old  form  of  combination,  by  gen- 
eral agreements  between  different  competing  firms,  was 
easily  made  and  as  easily  broken  ;  but  in  the  modern 
trust  the  competing  firms  or  corporations  which  are 
united  in  its  organization  absolutely  disappear.  Their 

347 


348  MONOPOLIES  AND    THE  PEOPLE. 

property  is  sold,  their  affairs  are  wound  up,  and  they 
cease  to  exist.  No  matter  what  disagreement  may  take 
place  among  those  in  control  of  a  trust,  there  is  no  means 
by  which  it  can  be  dissolved  and  its  property  transferred 
back  to  its  original  owners.  As  a  matter  of  fact,  in 
every  case  where  a  trust  organization  has  met  financial 
difficulties,  its  property  has  not  been  divided  up.  Reor- 
ganization has  been  effected,  and  a  new  trust  has  taken 
the  place  of  the  old  one,  a  generous  amount  of  water 
being  usually  injected  into  its  capital  stock  in  the  process. 

Again,  it  is  true  of  nearly  all  the  recent  trusts  that  a 
remarkably  stable  form  of  organization  has  been  chosen. 
The  trusts  have  issued  no  bonds  at  all,  or  bonds  of  trifling 
amount  compared  with  the  value  of  their  property. 
Their  capitalization  is  represented  by  preferred  and 
common  stock.  Thus  they  have  no  debts,  and  no  inter- 
est to  pay,  and  in  case  of  hard  times  or  new  competitors 
springing  up  they  can  stand  a  reduction  of  their  earnings 
until  they  are  only  sufficient  to  meet  their  operating 
expenses,  without  incurring  a  penny  of  debt. 

In  view  of  this  fact,  how  childish  is  the  oft-repeated 
assertion  that  the  trusts  will  be  handicapped  in  compet- 
ing with  independent  concerns  by  their  enormous  capi- 
talization and  the  "  water  "  in  their  stocks  !  As  a  matter 
of  fact,  there  is  not  one  independent  manufacturing  con- 
cern in  a  hundred  which  occupies  so  strong  a  position 
financially  as  these  recently  formed  trusts.  The  water 
in  the  trust  stocks  is  a  matter  for  investors  to  consider  ; 
but  it  in  no  way  affects  the  ability  of  these  corporations 
to  compete  in  the  market. 

Again,  there  has  been  much  talk  about  the  trusts  being 
handicapped  as  competitors  by  the  load  which  some  of 
them  are  carrying  in  the  shape  of  plants  more  or  less  out 


WHA  T  SHALL    WE  DO    WITH    THE    TRUSTS?       349 

of  date  or  poorly  situated.  These,  however,  while  they 
affect  the  earning  power  of  the  trust,  do  not  affect  its 
financial  stability  as  a  competitor.  If  forced  to  produce 
goods  at  a  cost  less  than  that  at  which  these  factories 
can  compete,  it  can  simply  close  them. 

So  far  as  can  be  foreseen,  then,  the  trusts  are  here  to 
stay.  They  are  a  direct  outcome  of  that  modern  tend- 
ency toward  the  destruction  of  competition  which  the 
author  traced  in  its  various  phases  ten  years  ago,  when 
the  first  edition  of  this  book  was  published,  and  which 
had  now  extended  and  manifested  itself  in  all  civilized 
countries. 

What  chance  has  an  independent  producer  in  compe- 
tition with  a  trust  ?  The  answer  to  this  question  will 
depend  on  the  character  of  the  business  in  which  the 
trust  is  engaged.  In  steel  production,  for  example,  the 
great  capital  required,  and  the  necessity  of  producing  on 
an  enormous  scale  in  order  to  produce  with  economy, 
makes  the  trust  practically  invincible  as  a  competitor. 
There  may  still  be  independent  producers  of  steel,  but 
they  will  exist  by  grace  of  the  trust,  not  otherwise.  If 
the  competition  becomes  a  fight  to  the  finish,  the  small 
producer  will  be  the  first  to  succumb.  On  the  other 
hand,  in  industries  in  which  great  technical  skill  is  re- 
quired, and  in  which  clever  invention  and  good  design 
are  important  elements,  the  trust  may  be  hampered  by 
the  bulk  and  necessary  red  tape  of  its  organization. 
Thus,  the  furniture  makers  may  form  a  trust,  but  they 
will  very  likely  find  some  designers  of  peculiar  artistic 
ability  producing  some  goods  of  a  superior  grade  for 
which  customers  are  ready  to  pay  large  prices. 

Again,  the  success  of  trusts,  as  of  any  other  organiza- 
tion, will  depend  on  the  men  who  are  placed  in  charge 


350  MONOPOLIES  AND    THE  PEOPLE. 

of  their  affairs.  Experience  has  already  shown  that 
incompetent  and  dishonest  management  can  bring  even 
a  trust  into  financial  difficulties,  and  experience  has  also 
shown  that  one  great  element  in  the  success  of  the  most 
successful  trusts  has  been  able  management.  It  is  worth 
noting  that  the  financial  resources  of  the  trusts  enable 
them  to  secure  the  highest  grade  of  talent  for  managers 
and  technical  advisers,  while  the  extent  of  the  interests 
which  are  combined  make  possible  the  service  of  the 
ablest  chemists,  engineers  and  other  experts,  whereas 
many  small  independent  concerns  have  too  limited  an 
output  to  afford  to  take  advantage  of  such  aids  to 
economic  production. 

We  may  not  pause,  however,  to  recount  the  methods 
by  which  a  trust  is  enabled  to  produce  and  sell  more 
cheaply  than  its  competitors.  Let  us  turn  at  once  to 
inquire  what  will  happen  when  times  are  dull,  orders  are 
scarce,  and  a  trust  and  its  small  competitors  engage  in  a 
struggle  to  test  the  survival  of  the  fittest.  It  is  only  too 
plain  where  the  victory  will  lie.  The  trust  covers  a 
broad  field  ;  its  competitor  a  small  one.  The  trust  can 
lower  its  prices  below  the  cost  of  production  in  the 
limited  field  which  one  competitor  supplies,  while  main- 
taining them  elsewhere.  The  competitor  must  soon  go 
to  the  wall  ;  but  the  reduction  in  the  trust's  profits  may 
be  trifling. 

The  trusts  can  make,  and  have  made,  contracts  grant- 
ing special  rebates  to  customers  buying  no  goods  made 
by  a  competitor.  They  have  gone  farther,  and  have 
refused  to  supply  goods  to  those  who  patronize  others. 
They  have  in  some  cases  gone  farther  still,  and  have 
used  criminal  methods  to  ruin  a  competitor's  business 
and  destroy  his  works. 


WHAT  SHALL    WE  DO    WITH   THE    TRUSTS?      351 

Against  such  competition  as  this,  it  need  hardly  be 
said,  no  independent  concern  can  stand  up.  But  in 
many  cases  none  of  these  methods  are  essential  to  the 
trust's  success.  Grant  that  the  trust  can  produce  and 
market  its  goods  at  substantially  less  expense  than  its 
small  competitor,  and  its  eventual  victory  is  certain. 

It  does  not,  of  course,  follow  from  this  that  competi- 
tion is  at  an  end  in  all  those  industries  in  which  trusts 
have  been  formed.  There  are  in  most  of  them,  and 
probably  will  long  continue  to  be,  independent  competi- 
tors. So  long  as  the  trust  has  not  producing  capacity 
enough  to  supply  the  entire  market,  there  will  be  more 
or  less  business  left  for  them.  Then  again,  there  are 
many  "  odd  corners  "  in  every  industry,  the  gleaning  of 
which  may  require  more  pains  than  the  managers  of  a 
huge  corporation  wish  to  take.  These  will  form  a  field 
for  the  small  producer. 

Besides  all  these  things,  the  factor  of  the  popular 
opposition  to  trusts  may  be  taken  into  account.  In 
many  industries  it  may  prove  a  handicap  of  no  mean 
proportions  to  the  trust  in  marketing  its  goods  in  compe- 
tition with  an  independent  rival. 

The  fact  that  a  trust  does  not  cover  the  entire  field  in 
which  it  is  organized,  however,  should  blind  none  to  its 
real  character  and  importance.  There  may  be  many 
reasons  why  a  trust  may  be  unable  or  may  not  care  to 
drive  all  its  competitors  from  the  field,  and  yet  it  may  be 
a  powerful  monopoly,  able  to  control  supply  and  dictate 
prices  to  great  numbers  of  consumers.  The  mere  fact 
that  independent  competition  exists,  even  in  considera- 
ble amount,  therefore,  is  no  proof  that  the  monopoly  is 
not  one  which  lays  heavy  burdens  upon  many  people. 
Because  a  trust  does  not  control  the  entire  market,  it 


352  MONOPOLIES  AND    THE  PEOPLE. 

does  not  follow  that  "  everything  is  all  right  and  the 
public  need  not  concern  itself  about  the  trusts." 

We  have  now  determined  that  the  trusts  are  here  to 
stay,  and  that,  taken  as  a  whole,  they  are  bound  to  take 
from  their  present  competitors  such  part  of  their  busi- 
ness as  they  choose.  Manifestly,  then,  merely  letting 
them  alone  will  not  result  in  their  disappearance,  as  has 
been  claimed,  neither  can  we  rely  on  outside  competition 
to  protect  the  public  from  the  extortion  of  the  trusts. 
What  measures  can  we  take,  then,  that  will  give  to  the 
public  the  protection  they  have  a  right  to  demand  ? 

Bunyan's  famous  allegory  tells  how  Christian  and  his 
companion  languished  for  a  long  time  in  the  dungeon  of 
Giant  Despair,  until  at  length  Christian  bethought  him- 
self that  he  was  a  fool  to  lie  in  a  foul  prison  while  he 
had  a  key  in  his  bosom  which  would  turn  any  lock  in  the 
entire  castle. 

Modern  society,  threatened  by  the  extortions  of  the 
trusts  in  hundreds  of  industries,  has  the  key  in  its  pos- 
session which  can  render  every  one  of  them  harmless. 
Every  one  of  these  monopolies  is  a  corporation — an 
artificial  person — created  by  society  and  subject  in  each 
and  every  respect  to  any  restrictions  which  society  may 
impose.  True,  the  making  and  enforcement  of  these 
restrictions  is  a  task  demanding  the  best  wisdom,  sound 
judgment  and  honest  statesmanship  that  civilization 
possesses  ;  but  it  is  not  an  impossible  task.  Though  it 
may  be  imperfectly  done  and  though  mistakes  may  be 
made,  great  improvement  over  present  conditions  is  cer- 
tainly possible. 

If  we  look  back  for  a  century,  or  even  a  much  shorter 
time,  we  find  that  the  carrying  on  of  industry  by  cor- 
porations is  a  thing  of  very  recent  growth.  The 


W 'HA  7'  SHALL    WE  DO    WITH   THE    TRUSTS?       353 

privilege  or  charter  permitting  the  organization  of  a  cor- 
poration was  jealously  guarded  in  the  days  of  our 
grandfathers.  Only  by  a  special  act  of  a  legislative 
body  could  a  charter  be  obtained,  and  the  business 
which  the  corporation  could  conduct  was  strictly  limited. 
Charters  were  frequently  limited  also  in  their  duration. 
The  statesmen  of  those  days  reasoned  that  it  was  unwise 
to  create  by  law  an  artificial  personality  to  endure  for  all 
time.  Such  a  creation  might  prove  at  some  future  day 
an  enemy  to  the  state  and  to  public  welfare.  It  was 
deemed  safer,  therefore,  to  place  a  limit  upon  the  cor- 
poration's life. 

Within  the  past  two-score  years,  however,  all  the  old- 
time  restrictions  upon  the  creation  of  corporations  have 
been  swept  away.  Anyone  may  buy  a  corporation 
charter  nowadays  for  a  song,  with  powers  to  conduct 
every  sort  of  business  under  the  sun.  A  charter  in  one 
State,  moreover,  empowers  it  to  conduct  business  in  every 
State.  There  is  nothing  gained,  therefore,  if  a  State  like 
Massachusetts  or  New  York  prepares  and  adopts  a  sound 
and  well-digested  system  of  laws  to  regulate  corporations. 
The  result  is  that  corporations  are  organized  in  New  Jer- 
sey, or  Delaware,  or  West  Virginia,  or  one  of  the  many 
States  which  impose  practically  no  restrictions  upon 
corporations  organized  under  their  laws. 

There  are  two  plans  by  which  this  difficulty  in  the  way 
of  the  proper  regulation  and  control  of  corporations  may 
be  overcome.  The  first  would  be  to  take  away  the  rights 
which  corporations  now  have  of  doing  business  in  States 
other  than  that  by  which  they  are  chartered.  The  man- 
ifest objection  to  this  is  that  it  establishes  a  precedent 
for  the  putting  up  of  barriers  to  commerce  between  the 

different  States.    All  are  agreed  that  one  of  the  most  ben- 
23 


354  MONOPOLIES  AND    THE  PEOPLE. 

eficial  features  of  the  federal  union  which  was  formed  at 
the  close  of  the  Revolution,  was  its  removal  of  State 
restrictions  upon  commerce.  The  freedom  of  trade  be- 
tween the  several  States  which  was  thus  insured  has  been 
of  incalculable  value  in  developing  the  country's  re- 
sources and  increasing  its  wealth  and  prosperity.  If  now 
we  establish  the  principle  that  one  State  may  shut  out 
from  doing  business  within  its  limits  a  corporation  organ- 
ized in  another  State,  we  shall  strike  a  serious  blow  at 
this  most  beneficial  system  of  interstate  commerce. 

Another  method  which  would  obviate  the  difficulties 
above  outlined,  and  which  is  apparently  the  only  logical 
manner  of  tackling  the  problem,  would  be  the  assumption 
by  Congress  of  the  sole  right  to  charter  corporations 
which  desire  to  extend  their  operations  beyond  the  limits 
of  the  States  in  which  they  are  formed.  Congress  has 
already  found  it  necessary  to  legislate  upon  such  com- 
mercial matters  as  bankruptcy  ;  and  there  is  far  greater 
need  that  it  should  undertake  the  task  of  dealing  with  the 
corporations  which  have  outgrown  the  power  of  the  States 
to  control  them. 

It  is  true  that  Congress  is  overburdened  already  with 
responsibilities  and  that  its  organization  fits  it  better 
to  obstruct  than  to  further  the  transaction  of  public  busi- 
ness ;  but  this  is  an  argument  for  the  reform  of  Con- 
gressional methods,  a  reform  that  needs  to  be  undertaken 
in  any  event,  not  for  the  shirking  of  duties  which  ob- 
viously belong  to  it. 

It  is  probable  that  if  it  were  deemed  for  the  public  in- 
terest, the  corporate  charter  of  every  trust  could  be 
revoked  and  its  dissolution  or  reorganization  under  a  new 
and  more  stringent  charter  could  be  compelled.  The 
corporation  is  a  creation  of  law,  and  the  commonwealth 


WHAT  SHALL    WE  DO    WITH   THE    TRUSTS?       3$$ 

which  permits  its  formation  can  compel  its  dissolution. 
The  organic  law  of  the  land,  as  expressed  in  State  and 
national  constitutions,  guarantees  no  rights  to  corpora- 
tions. We  have  engaged  in  a  great  experiment  in  per- 
mitting their  unlimited  creation  to  conduct  business  of 
any  and  every  sort.  If  it  is  now  decided  that  this  exper- 
iment works  badly,  we  can  return  to  earlier  practice  and 
impose  any  and  every  restriction  upon  corporations  that 
may  seem  best. 

Understanding  now  that  this  power  exists  in  the 
State  and  national  governments,  the  question  arises,  how 
should  it  be  exercised  ?  Would  it  be  wise  to  abolish 
outright  all  the  trust  consolidations  that  have  been 
formed  ?  By  no  means.  The  saving  of  the  "  wastes 
of  competition  "  which  the  trust  effects  has  been  fully 
explained  in  the  earlier  part  of  this  book.  It  is  beyond 
question  that  the  public  interests  can  be  best  served  by 
the  abolition  of  competition  in  many  fields  of  industry, 
provided  the  public  can  be  protected  from  abuse  of  the 
trust's  powers. 

It  is  entirely  within  the  powers  of  the  Government  to 
do  this.  It  can,  if  it  chooses,  permit  the  trusts  in  certain 
industries  to  continue  unchecked  except  by  their  inde- 
pendent competitors,  and  it  can  restrict  the  operation  of 
others  in  such  manner  as  seems  best. 

The  fact  has  already  been  commented  upon  that  con- 
solidation of  all  the  competitors  in  an  industry  greatly 
simplifies  the  task  of  government  regulation.  The  older 
methods  of  combination  to  defeat  competition,  by  secret 
agreements  between  the  competitors,  were  difficult  or 
impossible  to  reach.  The  anti-trust  laws  in  many  States 
have  made  such  secret  compacts  illegal  and  punishable 
for  years  ;  but  how  many  fines  and  how  many  prisoners 


356  MONOPOLIES  AND    THE  PEOPLE. 

have  resulted  ?     Evidence  to   secure  convictions  under 
such  laws  can  hardly  ever  be  obtained. 

The  trust,  however,  is  a  public  corporation,  and  as 
such  is  subject  to  such  regulation  as  may  be  deemed  for 
the  public  interest.  In  the  case  of  Budd  vs.  New  York 
(143  U.  S.  535),  the  United  States  Supreme  Court  said  : 

The  Government  regulates  the  conduct  of  its  citizens,  one  towards 
another,  and  the  manner  in  which  each  shall  use  his  own  property 
•when  such  regulations  becomes  necessary  for  the  public  good.  .  . 
When  a  business  becomes  a  practical  monopoly,  it  is  subject  to  reg- 
ulation by  the  legislative  power. 

This  decision,  it  is  to  be  noted,  was  rendered  in  a  case 
in  which  the  private  owner  of  a  grain  elevator  in  New 
York  contested  the  right  of  the  State  to  fix  the  maximum 
rates  which  he  might  charge,  and  the  complainant  had 
constitutional  rights  such  as  are  not  possessed  by  corpor- 
ations. Prof.  Frank  Parsons,  in  Municipal  Monopolies, 
holds  that  the  principles  laid  down  in  the  court  decisions 
in  this  case  and  in  the  Illinois  Grain  Elevator  cases  prove 
that  the  legislature  has  the  power  to  regulate  charges  in 
any  business  whatsoever. 

So  extreme  a  course  as  this,  however,  it  is  to  be  hoped 
may  become  necessary  in  few  industries.  If  it  is  clearly 
understood  that  the  power  exists  and  can  be  exercised 
when  necessity  demands,  trust  managers  will  be  disposed 
to  refrain  from  such  practices  as  will  make  such  a  course 
necessary.  Let  us  recount  some  of  the  other  measures 
which  are  worthy  of  consideration  as  means  for  control- 
ling the  trusts. 

i.  Every  trust  should  be  compelled  to  reduce  its  cap- 
italization to  such  a  point  that  the  total  at  par  will  not 
exceed  the  value  of  its  real  estate  and  the  cost  of  repro- 
ducing its  machinery  and  plant.  This  change  will  not 


WHAT  SHALL    WE  DO    WITH    THE    TRUSTS?       357 

injure  a  particle  those  who  hold  the  trust's  stocks  as 
legitimate  investments.  It  will  do  away  with  the  plea 
that  the  trust  must  charge  high  prices  for  its  goods  and 
pay  low  prices  for  labor  and  materials  so  that  it  can  pay 
dividends  upon  water.  Let  us  have  no  more  crocodile 
tears  shed  over  the  hypothetical  widows  and  orphans  who 
are  dependent  for  their  daily  bread  upon  this  watered 
stock  which  can't  pay  dividends  ! 

2.  Every  trust  should  be  compelled  to  make  absolutely 
public  all  its  affairs. 

It  is  true  that  this  means  of  effecting  corporate  reforms 
has  often  been  overrated  ;  but  it  certainly  has  a  large 
amount  of  value.  In  the  railway  field,  the  requirement 
of  the  filing  of  annual  reports  with  State  and  Interstate 
Railway  Commissions  has  proved  a  most  salutary  meas- 
ure. The  introduction  of  uniform  and  improved  methods 
of  accounting,  which  it  has  brought  forth,  has  alone  been 
worth  to  the  railways  of  the  country  every  cent  that  the 
Government  has  expended  in  the  work  of  the  Interstate 
Commerce  Commission. 

3.  An  amendment  to  the  Internal  Revenue  Act  should 
be  passed  increasing  largely  the  tax  on  every  transfer  of 
stock  in  an  incorporated  company.     The  evil  of  stock 
gambling,  which  the  recent  trust  mania  has  greatly  fos- 
tered, is  one  of  the  worst  curses  that  infects  the  business 
world  to-day.     It  takes  the  place  in  the  United  States 
that  is  held  by  the  lottery  in  Latin  nations.     We  may 
not  boast  of  our  moral  progress  in  destroying  the  lottery 
until  we  wipe  out  this  equally  debasing  evil.      The  evils 
which  grow  out  of  the  control  of  industrial  property  by 
stock-market  speculators,  we  have  traced  in  a  previous 
chapter.     A  tax  may  be  laid  on  transfers  of  stock  which 
will  be  no  serious  burden  to  the  legitimate  investor  but 


MONOPOLIES  AND    THE  PEOPLE. 

which  will  entirely  destroy  the  business  of  those  who  buy 
and  sell  for  speculative  purposes  merely.  Such  a  law, 
so  framed  as  to  reach  the  bucket-shop  evil  as  well  as  the 
gambling  which  is  more  injurious  because  more  respect- 
able, would  do  more  to  raise  the  level  of  commercial 
morality  than  any  single  measure  that  could  be  placed  on 
the  statute  book. 

4.  The  charter  of  every  trust  should  be  revoked  and 
its  reorganization  should  be  compelled  under  a  new  and 
stringent  charter,  closely  defining  its  powers  and  privi- 
leges and  its  duties  to  the  public.     It  should  be  left  free 
to  reduce  the  cost  of  manufacturing  and  marketing  its 
goods  by  improvement  of  methods  and  by  reduction  of 
wastes  ;  but  the  strongest  safeguards  should  be  thrown 
about  it  to  prevent  abuse  of  its  powers.     It  should,  for 
example,  be  compelled  to  treat  all  customers  alike.     If 
we  must  be  in  the  hands  of  monopolies,  these  monopolies 
must  refrain  from  discrimination.     They  have  no  more 
right  to  favor  one  customer  and  extort  from  another  than 
have  the  innkeeper  or  the  common  carrier. 

5.  An   expedient  which  the  author  has  long  had  in 
mind  for  aiding  in  compelling  the  observance  of  law  by 
trusts  and  other  monopolistic  corporations,  is  the  placing 
upon  the  Board  of  Directors  of  every  such  corporation, 
one  or  more  men  to  represent  the  people  and  to  see  that 
the  affairs  of  the  company  are  conducted  in  the  public 
interest   as  well  as  in  the  interest  of  the  stockholders. 
These  government  directors  would  be  appointive  officers, 
of  course,  and  it  might  even  be  feasible  to  create  a  spec- 
ial government  department  for  the  conduct  of  this  work, 
the  officers  of  which  would  be  some  such  experts  as  the 
present  force  of  national-bank  examiners. 

While  these  government  directors  would  be  a  minority 


WHAT  SHALL    WE  DO    WITH   THE    TRUSTS?       359 

of  the  Board,  they  would  be  in  a  position  to  know  of  and 
to  check  any  unlawful  acts,  and  to  compel  the  orderly 
and  proper  conduct  of  the  company's  affairs.  The  com- 
pany's books,  papers,  and  business  would  be  always  open 
to  their  inspection.  They  would  have  a  voice  in  the 
selection  of  all  managing  and  executive  officers,  and  in 
the  oversight  of  their  work.  They  could  use  their  in- 
fluence to  secure  just  and  fair  treatment  of  employees, 
and  to  prevent  the  use  of  the  trust's  power  to  oppress  or 
extort  either  in  buying  or  in  selling. 

Under  such  administration,  dividends  would  be  limited 
to  a  fair  rate  on  the  actual  capitalization,  and  when  a 
surplus  was  accumulated  sufficient  to  keep  the  company's 
finances  sound  and  provide  for  years  of  poor  returns,  the 
rate  at  which  products  were  sold  would  be  decreased. 

It  will  doubtless  be  said  that  such  a  proposition  would 
be  an  unwarranted  interference  of  the  Government  with 
private  business.  The  weak  point  in  this  argument,  how- 
ever, is  that  these  great  and  powerful  trusts  are  not 
"  private  business  "  at  all.  "  Use  your  own  so  as  not  to 
interfere  with  your  neighbor,"  is  the  old  legal  maxim. 
So  long  as  I  can  supply  my  necessities  as  well  at  one  store 
as  at  its  rival  on  the  next  corner,  nobody  wants  Govern- 
ment to  interfere  with  private  business.  But  when  a 
great  combination  of  capital  obtains  control  of  some 
necessity  of  life  or  of  comfort  and  gives  the  people  the 
choice  of  buying  at  the  price  it  sets  or  going  without, — 
then  its  character  as  a  private  business  has  disappeared. 
Its  administration  is  a  matter  of  grave  public  concern, 
and  the  Government  is  eminently  justified  in  taking  part 
in  that  administration. 

It  is  well  to  remember,  too,  that  this  proposition  is  not 
so  radical  as  it  may  seem.  It  would  actually  effect 


360  MONOPOLIES  AND    THE  PEOPLE. 

nothing  that  would  not  take  place  in  any  honestly  and 
efficiently  managed  private  business  in  which  free  com- 
petition has  full  sway.  Here,  too,  labor  is  fairly  treated, 
managers  are  chosen  for  merit  and  ability,  a  fair  price  is 
paid  for  goods  bought  and  the  prices  of  goods  sold  will, 
under  free  competition,  be  brought  down  to  a  point 
which  will  be  no  more  than  sufficient  to  pay  a  fair  inter- 
est on  the  capital  invested. 

There  is  another  aspect  of  this  proposition  which 
should  not  be  overlooked.  The  mere  presence  of  these 
government  directors  in  a  corporation  would,  in  many 
cases  put  a  check  upon  the  schemes  for  enriching  direc- 
tors and  managers  at  the  expense  of  the  stockholders. 
In  this  way  these  government  directors  would  be  a  great 
benefit  to  the  real  owners  of  the  trusts,  however  unwel- 
come they  might  be  to  speculative  officers. 

The  writer  well  knows  what  objection  will  be  raised  to 
this  proposition,  and  to  all  the  propositions  made  above, 
looking  to  the  protection  of  the  people  from  the  extor- 
tions of  monopolies.  It  will  be  alleged  that  government 
officials  are  too  dishonest  and  too  incompetent  for  us  to 
hope  that  any  beneficial  results  will  follow  from  govern- 
ment control  of  industry  in  any  degree.  Government 
directors  in  a  corporation,  it  will  be  said,  will  use 
their  position  to  further  their  own  private  speculations 
and  for  purposes  of  blackmail.  If  Congress  passes  laws 
to  control  the  trusts,  it  will  so  mould  them,  under  guid- 
ance of  a  powerful  lobby,  as  to  protect  the  trust's  interests. 
Such  arguments  as  these  deserve  honest  and  impartial 
consideration.  They  carry  unquestionably  a  certain 
measure  of  truth  ;  but  after  studying  them  without 
prejudice,  and  after  looking  at  the  results  of  experience 
in  many  different  fields,  the  conclusion  is  irresistible  that 


WHAT  SHALL    WE  DO    WITH   THE    TJfUSTS?       361 

much  more  of  good  than  of  evil  would  flow  from  the 
measures  here  proposed,  even  when  carried  out  by  gov- 
ernments so  far  from  perfection  as  those  of  recent  times. 

While  the  author  would  by  no  means  counsel  the  delay 
of  attempts  to  bring  the  trusts  under  government  super- 
vision until  governments  are  purified,  he  feels  now,  as  at 
the  conclusion  of  his  study  of  ten  years  ago,  that  the 
lesson  indelibly  impressed  on  everyone  who  studies  the 
relations  of  monopolies  and  the  people  is  the  need  for 
broad  and  vital  reforms  in  our  governmental  systems. 
Federal,  State  and  Municipal — all  need  to  be  thoroughly 
and  intelligently  reformed,  to  the  end  that  greater 
wisdom  and  virtue  may  reign  in  our  public  offices. 

There  is  a  current  fallacy  abroad  that  the  evils  in  our 
Government  of  which  we  complain  are  to  be  laid  to  a 
lack  of  moral  character  among  the  people.  The  real 
fact  is  that  the  people  are  not  at  fault  so  much  as  the 
system. 

In  the  discussion  which  is  contained  in  the  main  body 
of  this  volume,  the  author  emphasized  his  conclusion 
that  the  well-hated  monopolists,  against  whom  so  many 
bitter  curses  are  hurled,  are  no  better  and  no  worse  than 
any  other  class  of  people.  It  is  the  system  which  has 
made  them  and  has  made  also  the  army  of  unemployed 
who  beg  at  their  gates.  It  is  the  system  and  not  the 
people  which  most  needs  to  be  revolutionized. 

Exactly  so  with  evils  which  vex  us  in  our  Government. 
They  are  in  large  degree  not  the  fault  of  people  or 
officials,  but  of  the  system  under  which  we  live,  and 
which  needs  radical  changes  in  a  thousand  ways  to  fit  it 
to  the  conditions  and  requirements  which  exist  at  the 
dawn  of  a  new  century. 

To  consider  these  changes  in  greater  detail  than  we 


362  MONOPOLIES  AND    THE  PEOPLE. 

have  already  done  would  be  beyond  the  scope  of  the 
present  work  ;  and  the  author  would  repeat  the  conclu- 
sion which  he  most  earnestly  desires  to  impress  upon  the 
reader — that  the  only  remedy  for  the  evils  with  which 
modern  monopolies  menace  us  is  to  be  found  in  govern- 
mental control.  Faulty  and  defective  it  undoubtedly 
will  be,  as  is  every  other  work  of  man  ;  and  it  lies  with 
the  people,  and  those  who  have  the  power  to  lead  the 
people,  to  make  it  better. 


INDEX 


Adams,  Chas.  Francis,  on  rail- 
way rate  combinations,  50 

Adulteration  fostered  by  com- 
petition, II 

Agricultural  products,  limitation 
of  production,  127 

Altruism,  influence  of,  183,  261 

Anarchy,  danger  of,  188 

Anthracite,  control  of  supply  by 
railway  corporations,  33,  280 

Associated  Press,  monopoly  by, 
308 

Banks,   monopolies   among,    83, 

307 
Beef,    combination    of    packing 

houses,  77 
Bituminous      coal      production, 

combinations  in,  36,  281 
Borax  Trust,  283 
Boycott,  85,  104,  250 
Brick  clay,  control  of,  by  trust, 

282 
Bridges,  toll,  monopoly  by,  56 

Cables,  ocean,  monopoly  in,  291 
Calumet  and  Hecla  copper  mine, 

32 
Capital  not  subject  to  monopoly, 

131 

Car  springs,  combination  among 
makers  of,  85 

"Chambers  of  Shipping,"  Eng- 
lish, 290 


Charities,  influence  of,  189 
Christianity,  influence  of,  187 
Coal  production,  monopolies  in, 

33,  281 

Communism,  Christian,  188 
Competition  : 

Among  purchasers,  78 
Capital  required  for,  152 
Control  of  natural  agents,  154 
Definitions  of,  145 
Healthy  and  unhealthy,  152 
In  purchase  of  raw  materials, 
12 

In  railway  rates,  44,  50 
Intense,  causes  combination,  10 
Law  powerless  to  compel,  207 
Natural  laws  governing,  145 
Potential  and  actual,  158 
Reducing  intensity  of,  210 
Stimulated  by  tariff,  98 
Theory  of  universal,  133 
Variation  with  number  of  com- 
peting units,  150 
Waste  due  to,  150,  177 
Why  favored  by  public  opin- 
ion, 143 
Work  of,  in  social  development, 

141 
Congress,    need   for   reform    in, 

354 
Consolidation  of  steam  railways, 

45 

Consolidation,    street     railways, 
61,  299 


303 


3^4 


INDEX 


Consolidations,  laws  against,  206, 
285 

Contracts  in  restraint  of  compe- 
tition, 7,  247 

Convict    labor,  competition    of, 
with  trusts  proposed,  253 

Copper,  monopolies  in,  32,  282 

Copyright    monopoly,    why   not 
injurious,  89 

Corners,  12,  29,  80 

Corporation  charters  limited  in 
duration,  353 

Corporation   laws,  need  for   re- 
form in,  254,  352 

Corporations : 

Comparison  of  municipal  and 

private,  339 
National  control  of,  necessary, 

354 

Not  controlled  by  owners,  320 
Power  of  State  over,  352 
Publicity  of  affairs  of,  255 
Transfer  of  business  to,  318 
Cotton  Oil  Trust,  8,  79 

Dartmouth     College     Decision, 

343 

Demand,    reduced    by    rise    of 
price,  16 

Demand  not   always  responsive 
to  change  in  prices,  327 

Department  store,  growth  of,  304 

Diamonds,  profits  of  De  Beers 
mines,  283 

Directors,  government  appoint- 
ment of,  242,  289,  356 

Discrimination  : 

By  railway  companies,  52 
By  shipping  companies,  290 
By  trade  monopolies,  85 
Trusts  compelled  to  cease,  249, 
358 

Dishonesty  in  corporation  man- 
agement, 322 

Distribution  of  wealth,  absolute 
equity  in,  impossible,  221 

Division  of  labor  in  production, 
origin  of,  136 


Domestic  servants,  combinations 
among,  125 

Electric  lighting,  competition  in, 
harmful,  66,  297 

Electric  wires,  increase  of  over- 
head, due  to  competition,  66 

Eminent  domain : 

Right  of,  how  justified,  217 
Used  by  monopolies,  54 

Envelope  trust,  91 

Evils  due  to  monopoly,  162,  317 

Express    companies,     monopoly 
by,  295 

Extravagance  not  a  public  bene- 
fit, 1 66 

Factory  acts  due  to  labor  unions, 

"3 
Factory   system   of    production, 

20,  319 

Farmers'  Alliance,  128 
Farmers  : 

Combination   among,  impossi- 
ble, 127 

Lack  of  competition  in  pur- 
chases from,  79 
Federation,  English  employers', 

312 

Federation,  labor  unions,  310 
Fire  insurance, monopolies  in,  83 
Fourier,  incident  in  life  of,  81 
Franchise  companies,  payments 

by,  336 
Franchises : 

Competition  for,  158 

Fixing  value  of,  302,  341 

Property  in,  216 
Fraternity,  influence  of,  193 
Free  Trade,  see  Tariff,  99 
Freight  rates,  see  Railway  Rates 

Gas: 

Cost  of,  in  United  States  cities, 

64 

In  European  cities,  65 
Gas-works  : 

Competition  in,  63 


INDEX 


Gas-works — Cont'd. 

Lease  of  Philadelphia,  296 
Municipal,  number  in  United 

States,  62 
Gold  and  silver  not   subject  to 

monopoly,  28 
Government : 

Conduct  of  industry  by,  why 

inefficient,  199 

Interference   with  private   in- 
dustries, 214 
Monopolies  due  to,  87 
Need  for  improving  character 

of,  262,  360 
Grange,  128 

Grocers'  Guild  of  Canada,  76 
Guilds,  trade,  73 

Homes,    why    workmen    cannot 
own,  330 

Individualism,  principle  of,  197 
Industry,  transfer  of  control  of, 

324 

Insurance   companies,   combina- 
tion among,  83,  307,  321 
Intemperance,  one  cause  of,  174 
Interdependence  of  society,  137, 

201 
Interest     charges    reduced     by 

combinations,  13 
Interstate  commerce  law,  50,  209 
Inventors,  injured  by  trust,  12 
Investments,  reduction  in  income 

from,  170 

Iron    ore,    combination    among 
producers  of,  27,  279 

Kerosene  oil,   reduction    in   cost 
of,  22 

Labor,  effect  of  raising  price  of, 

106 
Laborer,    comparative  condition 

of,  114 

Labor  leaders,  character  of,  194 
Labor   markets,    control    of,  by 

trusts,  17 


Labor-saving    machinery,   when 

not  a  benefit  to  labor,  327 
Labor  unions,  103,  130,  310 

Influence  of  trusts  in  formation 
of,  117 

Protection  of  workmen's  rights 

by,  m 
Labor,  unskilled,  combination  in 

unions  difficult,  125 
Laissez-faire,  doctrine  of,  137 
Land  grants  to   railways,   effect 

of,  94 

Land,  monopoly  in,  68,  220 
Land,     private    ownership     of, 

beneficial,  223 
Legislation : 

Anti-trust,  2,  333 

Class,  evils  of,  202 

Due  to  labor  unions,  313 
Linseed  Oil  trust,  9,  15 

Manufacturing    industries,    mo- 
nopolies in,  see  Trusts. 

Marble     (Vermont)     Co.,     284 

Marketing  goods,  cost  of,  n 

Meat  combinations  among  pro- 
ducers, 77 

Middlemen,  powers  of,  reduced, 
72 

Milk  Trust,  79 

Mineral    monopolies,    plan    for 
control  of,  239 

Mineral  wealth,  monopolies   of, 
26,  279 

Monopolies : 

Abolition  of,  why  impossible, 

159 
Absolute  control  of  supply  not 

necessary  to,  72 
Control   of  raw  materials  by, 

41 

Definitions  of,  155 

Employment  limited  by,  175 

Government  ownership  or  con- 
trol of,  160,  2ir,  356 

Plans  for  control  of,  227 
Monopolists,  no  worse  than  other 

men,  193 


366 


INDEX 


Mountain  passes,  monopoly  of,  55 
Municipal  electric  light   plants, 

298 
Municipal  government,  need  for 

improving,  346 
Municipal  monopolies,  59,  295 

Foreign  practice  in    treating, 
300 

Plans  for  control  of,  241,  345 
Musicians,  combination  among, 

124 

Natural    agents,    list    of     those 

which  are  limited,  156 
Natural   gas   controlled   by  mo- 
nopoly, 40 

Natural  wealth,  property  in,  216 
News,  monopoly  in  sale  of,  308 
Non-union  workmen,  312 

Occupations,     classification     of, 

119 
Oleomargarine,      legislation 

against,  129 
Over-production,   cause    of,    10, 

163,   171 

Packing  trade,  Chicago,  294 
Paper  trade,  combination  in,  147 
Paralleling  existing  railway  lines, 

47,  177 
Patents,  control  of,  by  trusts,  n, 

Qi 

Patents,  monopoly  granted  by, 
89 

Patriotism,  contrast  with  parti- 
sanship, 263 

People,  right  of,  to  control  mon- 
opolies, 213 

Petroleum  Producers'  Associa- 
tion, 40 

Political  economy,  orthodox 
school  of,  143 

Politics,  influence  of  franchise 
companies  in,  338 

Pools,  railway,  49 

Population,  proportion  not  bene- 
fited by  monopolies,  121 


Postal  system,  advantage  of  mo- 
nopoly in,  161 

Potash  salts,  control  of   world's 
supply,  283 

Prices : 

Fixing  by  law,  251 

Lowered  to  increase  sales,  184 

Raising  of,  by  trusts,  14,  15 

Production,    cheapest  when    on 
largest  scale,  20 

Production,     limitation     of,    by 
trusts,  13,  17 

Professions,  restriction    of  com- 
petition in,  123 

Profit-sharing,  260,  326 

Property,  rights  of  private  hold- 
ers of,  214,  343 

Property   rights  in   products  of 
labor,  142,  215 

Protection,  see  Tariff. 

Publicity,     requirement     of,    in 
trust  corporations,  356 

Quicksilver,  monopoly  in,  283 

Railway     Commission,      Texas, 
work  of,  288 

Railway    companies,    consolida- 
tions of,  45 

Railway    competition,    intensity 
of,  47 

Railway   rate    agreements,    why 
necessary,  48 

Railway  rates : 

Discrimination  in,  286 
Equitable  basis  for  fixing,  233 
Texas  plan,  287 

Railway    terminals,     why     city 
should  control,  68 

Railway  transportation  a  neces- 
sity, 43 

Railways : 

Competitionduringdecade,  285 
Control  of  coal  markets,  36 
Government   control  of,    229, 

288 

Influence   of,   on  retail    trade 
competition,  74 


INDEX 


367 


Railways — Confd. 

Paralleling  of,  waste  due    to, 

47,  177 

Suburban  traffic  on,  60 
Retail     trade,  combinations   in, 
73 

Savings  Banks,   reduced  rate  of 

interest  in,  331 
Secretan  copper  syndicate,  29 
Shipping  rings,  290 
Shipping,  subsidies  to,  94 
Social  equality,  115 
Social     system,     evolution      of, 

141 

Societism,  principle  of,  197 
Society,  interdependence  of,  137, 

201 

Standard  Oil  Trust,  8,  21 
Steam,  distribution  in  city  streets, 

67 

Steamship  transportation,  mo- 
nopolies in,  55 

Stock  market,  influence  in  pro- 
moting trusts,  277 

Stock  speculation,  168,  323 

Stock  transfers,  tax  on,  357 

Street  railways,  consolidation  of, 
61,  298 

Street  railways,  why  natural  mo- 
nopolies, 56 

Strikes,  English  engineers',  311 
In  railway  service,  105,  237, 

3" 
Loss  caused  by,  180,  258 

Subsidies  tend  to  promote  mo- 
nopolies, 94 

Suburban  towns,  control  of,  by 
railways,  60 

Subways  for  electric  wires,  67, 
68 

Sugar  Trust,  closing  of  mills  by, 

17 
Sugar    Trust,    Judge     Barrett's 

decision,  255 
Sulphur    (Anglo -Sicilian)    Co., 

284 
Supply  and  demand,  law  of,  165 


Tariff,  influence  of,  on  monopo- 
lies, 95,  256. 

Tax  on  stock  transfers,  357 
Telegraph,  monopoly  in,  56,  291 
Telephone  business,  competition 

in,  93,  293 

Telephone  patents,  92,  292 
Terra  cotta,  combination  in,  281 
Texas,    plan  for  fixing  railway 

rates  in,  287 
Tin,  corner  in,  29 
Trade  associations,  first  step  to- 
ward combination,  9 
Trade,  monopolies  in,  71,  303 
Trade    Unions,    103,    109,    130, 

310 
Transportation : 

Ancient  and  modern,  42 
Water,  monopolies  in,  289 
Trusts  : 

Advantages  of,  typical,  9 
Capitalization  of,  276 
Combination  with  department 

stores,  306 
Competition    of    independent 

producers  with,  349 
Definitions  of,  i,  7 
Discrimination  by,  350 
Fraternal  spirit  aids  in  forma- 
tion of,  190 

Increase  of  prices  by,  325 
Influence   on   trade   combina- 
tions, 75 

Legislation  against,  2 
List  of,  in  February,  1888,  23 
List  of,  July,  1899,  270 
Modes  of  organization  of,  7 
Outgrowth  of  the  factory  sys- 
tem, 19 
Over-production    caused     by, 

172 

Permanency  of,  24,  328 
Reduction  of  demand  for  labor 

due  to,  21,  117,  328 
Right  of  government  to  con- 
trol, 225, 

Secrecy  of  operations  a  public 
injury,  324 


368 


INDEX 


Trusts— Cont'd. 

Success  influenced  by  manage- 
ment, 350 
Trust    system    of    combination, 

why  abandoned,  269 

Unearned  increment,  70,  337 
Unemployed,  problem  of,  329 

Value  of  natural  monoplies,  288 

Wages  : 

Benevolence  in  fixing,  190 

Fixed  by  law,  108 

Raised  by  increasing  demand 

for  labor,  260 
Warehousing,  combinations    in, 

82,  293 
Waste  of  competition  : 

In  manufacturing,  ir 

In  railway  traffic,  53 


Watered  stock  in  trust  organiza- 
tions, 277, 356 

Water  supplies,  competition  in, 
not  possible,  62,  218 

Water  transportation,    monopo- 
lies in,  289 

Water-works,    acquirement     by 
cities  of  private,  295 

Wealth,  congestion  of,  166 
Distribution  of,  138,  165,  268 
Increase    of     production    of, 

beneficial,  163 

Not   possible   to    monopolize, 
132 

Western  Union   Telegraph  Co., 
57,  291 

Wholesale  trade,  combination  in, 
74 

Zinc  production,  monopolies  in, 
29,  283 


Economics. 


Hadley's   Economics. 

An  Account  of  the  Relations  between  Private  Property 
and  Public  Welfare.  By  ARTHUR  TWINING  HAD- 
LEY,  Professor  of  Political  Economy,  in  Yale  Uni- 
versity. 8°,  $2.50  net. 

The  work  is  now  used  in  classes  in  Yale,  Princeton,  Harvard,  Amherst,  Dart- 
mouth, Bowdoin,  Vanderbilt,  Bucknell,  Bates,  Leland  Stanford,  University  of 
Oregon,  University  of  California,  etc. 

"The  author  has  done  his  work  splendidly.  He  is  clear,  precise,  and 
thorough.  .  .  .  No  other  book  has  given  an  equally  compact  and  intelligent 
interpretation." — American  Journal  of  Sociology. 

The  Bargain  Theory  of  Wages. 

By  JOHN  DAVIDSON,  MA.,  D  Phil.  (Edin.),  Professor  of 
Political  Economy  in  the  University  of  New  Bruns- 
wick. I21T1O,  $I.5O. 

A  Critical  Development  from  the  Historic  Theories,  together  with  an  examin- 
ation of  Certain  Wages  Factors :  the  Mobility  of  Labor,  Trades  Unionism,  and 
the  Methods  of  Industrial  Remuneration. 

"  This  able  volume  is  the  most  satisfactory  work  on  Distribution  that  has  yet 
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economics  as  the  most  important  contribution  to  the  science  of  Political  Economy 
that  has  recently  appeared." — Interior. 

Sociology. 

A  Treatise.  By  JOHN  BASCOM,  author  of  "^Esthetics," 
"  Comparative  Psychology,"  etc.  12°,  $1.50. 

"  Gives  a  wholesome  and  inspiring  word  on  all  the  living  social  questions  of 
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and  truer  are  rich  with  the  finer  wisdom  of  the  time.  The  author  is  always 
liberal  in  spirit,  generous  in  his  sympathies,  and  wise  in  his  knowledge."— Critic. 

A  General  Freight  and  Passenger  Post. 

A  Practical  Solution  of  the  Railroad  Problem.  By 
JAMES  L.  COWLES.  Third  revised  edition,  with  ad- 
ditional material.  12°,  cloth,  $1.25  ;  paper,  socts. 

•'  The  book  gives  the  best  account  which  has  thus  far  been  given  in  English  of 
the  movement  for  a  reform  in  our  freight  and  passenger-tariff  policy,  and  the 
best  arguments  in  favor  of  such  reform.  '—EDMUND  J.  JAMES,  in  the  Annals  of 
Political  and  Social  Science. 

"  The  book  treats  in  a  very  interesting  and  somewhat  novel  way  of  an  ex- 
tremely difficult  subject  and  is  well  worth  careful  reading  by  all  students  of 
the  transportation  question."  —  From  letter  of  EDW.  A.  MOSELEY,  Secretary  of 
the  Interstate  Commerce  Commission,  Washington,  D.C. 


Q.  P.  PUTNAM'S  SONS.  New  York  &  London. 


Sociology. 

Social  Facts  and  Forces. 

The  Factory — The  Labor  Union — The  Corporation — 
The  Railway— The  City— The  Church.  By  WASH- 
INGTON GLADDEN,  author  of  "  Applied  Christianity," 
"Tools  and  the  Man,"  etc.  12°,  $1.25. 

"The  book  is  full  of  invigorating  thought,  and  is  to  be  recommended  to  every 
One  who  feels  the  growing  importance  of  public  duties." — The  Outlook. 

Socialism  and  the  Social  Movement  in 
the  Nineteenth  Century. 

By  WERNER  SOMBART,  University  of  Breslau,  Germany. 
Translated  by  ANSON  P.  ATTERBURY.  With  Intro- 
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Economy  in  Columbia  University.  12°,  $1.25. 

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is  certainly  an  excellent  piece  of  work." — j.  B.  CLARK,  Professor  of  Political 
Economy  in  Columbia  University. 

The  Sphere  of  the  State, 

or,  The  People  as  a  Body  Politic.  By  FRANK  S.  HOFF- 
MAN, A.M.,  Professor  of  Philosophy,  Union  College. 
Second  edition.  12°,  $1.50. 

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attention." 

Anarchism. 

A  Criticism  and  History  of  the  Anarchist  Theory.  By 
E.  V.  ZENKER.  12°,  $1.50. 

"  The  fullest  and  best  account  of  anarchism  ever  published.  ...  A  most 
powerful  and  trenchant  criticism." — London  Book  Gazette. 

Suggestions  Toward  an  Applied  Science 
of  Sociology. 

By  EDWARD  P.  PAYSON,  12°.     $1.25. 

"  Mr.  Payspn  has  given  us  a  va/uable  little  volume  on  a  very  large  and  most 
important  subject." — Portland  (Me.)  Press. 


Q.  P.  PUTNAM'S  SONS,  New  York  &  London. 


QUESTIONS   OF   THE   DAY. 

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77 — Primary  Elections.  A  Study  of  Methods  for  Improving  the  Basis  of 
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QUESTIONS   OF   TL 


1158  00207  9431 


[ONS   OK    THE    DAY"  SERIES. 


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liaker, 

Bourru  -  >.  24 

Cowles,  J.  ! 

Crook  •-  94 

fjo 
I 

ISM*.  J.  R..  N,,.  3s 
Dugdale,  R.  L.,  No.  14 
Ehrich,  1..  R.,  No.  70 
Elliott,  J.  K..  N 

Foulke,  \V.   I>  .  N.-.  43 

•  2.  93 
Giffen,  R.,  No.  20 

No.  85 

Hall,  1?..  N...  71 
Hitchcock,  11.,   N 
Jacob! ,  M.  1'.,  No.  80 


\V.  II  ,   \ 


A     000  098  362     7 

.  .iLiiaill,   <J.    XI.,    i>0.   O/ 

23 

Schoenhof. 

Shearman, 
Sherman,  Hon.   ! 
Shriver,  E.  J.,  No.  63 
Stokes,  A.  1'.,  No.   79 
Storey,  M.,  No.  58 
Strange.  D.,  No.  72 
Swan,  <  .  II.,  NO.  91 
Taus-ii,',  F.  \V.,  Nos.   47,  74 
Touryce,  A.  \V.,   No.  88 
Tyler,  I  .  G.,  No.  68 

D.  A.,  Nos.  54,  (,4,  71,  87 
\Vlicclcr,  E.  1'.,  No.  84 


(,     l'.    PUTNAM'S  SON 

NEW  YOKK 
27  and  29  West  23<1  v  24  P.cilfonl  Street.  Strand 


